Question

Savion is restoring a car and has already spent $4,000 on the restoration. He expects to be able to sell the car for $5800. Savion discovers that he needs to do an additional $2,400 of work to make the car worth $5,800 to potential buyers. He could also sell the car now, without completing the additional work, for $3,800. What should he do?.

Answer 1

Based on the cost of the additional work and the amount gained from selling, Savion should sell the car now for $3,800.

What is Savion's best course of action?

If Savion were to add the additional work, his profit would be:

= 5,800 - 2,400

= $3,400

This is less than the $3,800 he could make from selling the car now so his best course of action is to sell the car for $3,800 to get a larger profit.

The previous cost of $4,000 is a sunk cost so is not relevant to the calculation.

Find out more on sunk costs at https://brainly.com/question/17196993.

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