In the fall, Jay Thompson decided to live in the university dormitory.
He signed the dorm contract under that he was obligated to pay room rent for full college year. One clause expressed that if he moved out during year, he could sell the dorm contract to another student who would move into dormitory as his replacement. Dorm cost was $5000 for two semesters, that Jay had already paid.
A month after he moved into dorm, he made decision he would prefer to live in the apartment. That week, after some searching the replacement to fulfill the dorm contract, Jay had two offers. One student presented to move in immediately and to pay Jay $300 per month for 8 remaining months of school year. The 2nd student offered to move in second semester and pay $2500 to Jay.
Jay evaluates his food cost per month is $500 if he lives in dorm and $450 if he lives in apartment with 3 other students. His share of apartment rent and utilities will be $400 per month. Suppose every semester is 4½ months long. Disregard small differences in timing of disbursement or receipts.
i) Find three alternatives available to Jay?
ii) Estimate cost for each of alternatives
iii) What do you suggest that Jay do?