Question

The maintenance expenses on a rental house you own average $200 a month and property taxes are $4,800 annually. The house cost $238,500 when you purchased it four years ago. The house was recently appraised at $247,600. If you sell the house you will incur $12,900 in costs. What value should you place on this house should you opt to use it as your professional office?

Answer 1

Answer:

The correct answer is $234,700.

Explanation:

According to the scenario, the given data are as follows:

Appraised value = $247,600

Cost incurs in house = $12,900

Purchased cost = $238,500

So, we can calculate the opportunity cost by using following formula:

Opportunity Cost = Appraised Value of the house – Cost incur

By putting the value, we get

= $247,600 – $12,900

= $234,700