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What is the overall profit the man makes?

0 votes

A man decides to buy a nice horse. He pays $60 for it, and he is very content with the strong animal. After a year, the value of the horse has increased to $70 and he decides to sell the horse. However, already a few days later he regrets his decision to sell the beautiful horse, and he buys it again. Unfortunately, he has to pay $80 to get it back, so he loses $10. After another year of owning the horse, he finally decides to sell the horse for $90.

posted Apr 23, 2014 by anonymous

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1 Answer

+2 votes

total cost of buying the horse twice = 60+80 = $140
total gain from selling the horse twice = 70+90 = $160

If we pay no attention to the poor choice of words, and follow the spirit of the question, it seems that the man profits $20 from his buying and selling venture. There are, of course, serious problems with this conclusion.

First, we don't know how much the man spent on feed and other necessities for the horse while he owned it for two years, but one may incontrovertibly deduce that this amount would be more than $20.

Secondly, the question states that he "decides to sell the horse for $90." But not that the sale is ever completed. I can decide to sell a shiny nickel for $10, but until I find a willing buyer, I haven't profited the $9.95. Thus, until the sale is actually complete, no profit is made. (in fact he's showing a loss)

Finally, although less common, some people who own horses actually profit from the ownership by renting use of the horse or other such activities. Since no information about this is given, we cannot calculate that into the profit. It's possible that the man profited immensely from the venture if the horse earned him $200,000 a year in racing proceeds (for example.)

answer Jun 2, 2014 by anonymous

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