Question

Sue purchased a house for $89,000, spent $56,000 upgrading it, and currently had it appraised at $212,900. The house is being rented to a family for $1,200 a month, the maintenance expenses average $200 a month, and the property taxes are $4,800 a year. If she sells the house she will incur $20,000 in expenses. She is considering converting the house into professional office space. What opportunity cost, if any, should she assign to this property if she has been renting it for the past two years?

Answer 1

Opportunity cost = $192,900

Step-by-step explanation:

The opportunity cost is the "cost" incurred by not enjoying the benefit associated with the best alternative choice

DATA

Current value = $212,900

Selling expense = $20,000

Opportunity cost = Current value - selling expense

Opportunity cost = $212,900 - $20,000

Opportunity cost = $192,900

Here Sue is Decide to convert the house into professional office space she would lose te opportunity cost of $192,000