John Cassaway owns his own taxi, which he bought an $18,000 permit to operate two years ago.
Question:
John Cassaway owns his own taxi, which he bought an $18,000 permit to operate two years ago. Mr. Cassaway earns $36,000 a year operating as an independent but has the opportunity to sell the taxi and permit for $73,000 and take a position as dispatcher for Sartino Taxi Co. The dispatcher position pays $31,000 a year for a 40-hour week. Driving his own taxi, Mr. Cassaway works approximately 55 hours per week. If he sells his business, he will invest the $73,000 and can earn a 10 percent return.
Required
a. Determine the opportunity cost of owning and operating the independent business.
b. Based solely on financial considerations, should Mr. Cassaway sell the taxi and accept the position as dispatcher?
c. Discuss the qualitative as well as quantitative factors that Mr. Cassaway should consider.
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
Step by Step Answer:
a By holding on to his business Mr Cassaway is losing the opportunity to sell it Accordingly the opp...View the full answer
