Norman Dowd owns his own taxi, for which he bought a $11,000 permit to operate two years ago. Mr. Dowd earns $33,000 a year operating as an independent but has the opportunity to sell the taxi and permit for $41,500 and take a position as dispatcher for Carter Taxi Co. The dispatcher position pays $32,500 a year for a 40-hour week. Driving his own taxi, Mr. Dowd works approximately 55 hours per week. If he sells his business, he will invest the $41,500 and can earn a 10 percent return. Required Determine the opportunity cost of owning and operating the independent business. Calculate the earnings of Norman Dowd operating as an independent and the earnings of Norman Dowd working as a dispatcher. Based solely on financial considerations, should Mr. Dowd sell the taxi and accept the position as dispatcher?

Question

Business

Brenda Ball

16 October, 09:02

Norman Dowd owns his own taxi, for which he bought a $11,000 permit to operate two years ago. Mr. Dowd earns $33,000 a year operating as an independent but has the opportunity to sell the taxi and permit for $41,500 and take a position as dispatcher for Carter Taxi Co. The dispatcher position pays $32,500 a year for a 40-hour week. Driving his own taxi, Mr. Dowd works approximately 55 hours per week. If he sells his business, he will invest the $41,500 and can earn a 10 percent return. Required Determine the opportunity cost of owning and operating the independent business. Calculate the earnings of Norman Dowd operating as an independent and the earnings of Norman Dowd working as a dispatcher. Based solely on financial considerations, should Mr. Dowd sell the taxi and accept the position as dispatcher?

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Answers (1)

Know the Answer?

Elian Schwartz · Answer 1

a. $41,500

b. $36,650

c. Yes, Mr Dowd will sell the taxi and accept the position as dispatcher role.

Explanation:

The computation of given question is shown below:-

a. Opportunity cost = $41,500

b. Operating as independent = $33,000

Working as dispatcher = Dispatcher pays + (Earn return Percentage * Opportunity cost)

= $32,500 + (10% * $41,500)

= $32,500 + $4,150

= $36,650

c. Yes, Mr Dowd will sell the taxi and accept the position as dispatcher role.