Sunk and opportunity cash flows

Assignment Help Finance Basics

Reference no: EM13756745

Sunk and opportunity Cash flows

Don and Betsy Draper have been living at their present home for the past 6 years. During that time, they have replaced the water heater for $375, replaced the dishwasher for $599, and have had to make miscellaneous repair and maintenance expenditures of approximately $1,500. They have decided to move out and rent the house for $975 per month. Newspaper advertising will cost $75. Don and Betsy intend to paint the interior of the home and power-wash the exterior. They estimate that will run about $900. The house should be ready to rent after that. In reviewing the financial situation, Don views all of the expenditures as being relevant, and so he plans to net out the estimated expenditures discussed above from the rental income.

Do Don and Betsy understand the difference between sunk costs and opportunity costs? Explain the two concepts to them.
Which of the expenditures should be classified as sunk costs and which should be viewed as opportunity cash flows?

Reference no: EM13756745

Questions Cloud

How important is the role of culture in management : How important is the role of culture in management? How can we best cope with cultural differences in management practices? From you own experience, how does your company deal with cultural differences in the work place?

Write an essay on christopher columbus was hero or villain : Write a five paragraph history essay about whether Christopher Columbus was a "hero" or "villain"

Describe zappos market offering and value proposition : Describe Zappos' market offering. What is Zappos' value proposition? How does it relate to its marketing offering? How does Zappos build long-term customer relationships?

Each characteristic you chose is so critical : Describe in your own words what you believe are the four most important characteristics of high - performing project teams. Discuss why you believe each characteristic you chose is so critical. Explain how they are related to each other.

Sunk and opportunity cash flows : Don and Betsy Draper have been living at their present home for the past 6 years. During that time, they have replaced the water heater for $375, replaced the dishwasher for $599, and have had to make miscellaneous repair and maintenance expenditure..

Forecast for the rental and leasing revenue : Based on the formula you get from the regression output, answer the following questions: What is the forecast for the rental and leasing revenue for the year 2011?

Countrys political and economic environment and risk : What is the relationship between a country’s political/economic environment and risk? What about corruption? Please provide examples to support your post!

Burton snowboards the manufacturing process trades-off : At "Burton Snowboards" The manufacturing process trades-off the focus dimension of: The "what is Operations Management" video indicates that the methods to identify continuous improvement in a manufacturing process include:

Advantage can continental derive from real-time system : What strategic advantage can Continental derive from the real-time system as opposed to a traditional information system?

User Account

All Pages