Calculate his total opportunity cost of opening the company

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Charles decided to open a lawn-mowing firm. To do so, he buys a mowing machine for $7,000 and gasoline ($2.2 in gas is needed to mow each yard) and pays a helper $25 per yard. Prior to opening the company, he earned annually $3,000 as a life guard at the swimming pool. The money he used to buy the mowing machine could otherwise have earned 1% per year in the bank and the mowing machine depreciates at 20% per year. He plans to mow 400 yards per year. Calculate his total opportunity cost of opening the company at the year and specify how high the mowing price per yard should be in order for his decision to be justified at the year. (Hint: Only a fraction of the purchase price of mowing machine should be included into the opportunity cost.)

Reference no: EM131096197

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