Bo buys and sells real estate. Two weeks ago, he paid $400,000 for a house on Cypress Street, intending to spend $50,000 on repairs and then sell the house for $500,000. Last week, the city government announced a plan to build a new landfill on Cypress Street just down the street from the house Bo purchased. As a result of the city's announced plan, Bo is weighing two alternatives: He can go ahead with the $50,000 in repairs and then sell the house for $390,000, or he can forgo the repairs and sell the house as it is for $350,000. He should

Question

Quizplus · Accepted Answer

Forgoing the repairs and selling the house as it is for $350,000 minimizes Bo's loss. If he spends $50,000 on repairs and sells for $390,000, his total expenditure would be $450,000 (purchase + repairs), leading to a loss of $60,000. Selling without repairs for $350,000 results in a smaller loss of $50,000 (purchase price - sale price), making it the better financial decision.

Bo Buys and Sells Real Estate