Monica has spent $30,000 purchasing and repairing an old cabin, which she expects to sell for $40,000 once the repairs are complete. She discovers that she needs an additional repair, which will cost $20,000, in order to complete the repairs. She can sell the cabin as it is now for $25,000. What should she do?

Question

Quizplus · Accepted Answer

If Monica sells the cabin now for $25,000, she will incur a loss of $5,000 ($30,000 - $25,000). If she spends an additional $20,000 on repairs, her total cost will be $50,000, and she expects to sell it for $40,000, resulting in a $10,000 loss. Therefore, selling now minimizes her losses.

Monica Has Spent $30,000 Purchasing and Repairing an Old Cabin