Larissa has spent $480,000 purchasing and repairing an old century home, which she expects to sell for $520,000. She discovers that she needs an additional repair, which will cost $80,000. She can sell the house as it is now for $460,000. What should she do?

Question

Quizplus · Accepted Answer

If Larissa sells the house now for $460,000, she will incur a loss of $20,000 ($480,000 - $460,000). If she spends an additional $80,000 on repairs, her total cost will be $560,000, and selling for $520,000 will result in a $40,000 loss. Therefore, selling now minimizes her loss.

Larissa Has Spent $480,000 Purchasing and Repairing an Old Century