Wanda Weeks is tired of running her small machine tool company. She wishes to sell it in order to use her time and money elsewhere. She is currently earning a salary of $85,000 per year and a 10 percent return on her capital investment. She wants to take a job in a bank and invest her capital in a mutual fund. What issues should she look at before making the decision to change careers?
What will be an ideal response?
She should look at the opportunity cost of her time and capital. The total opportunity cost of running her machine tool business is the value of both her time and her capital. She should compare how much she could earn from both labor income and selling her capital investment in the machine tool business to her current labor income and capital return as the owner of this business.
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