Question
In: Finance
Education: Assume people live 2 years: youth (year 1) and adult (year 2). Youths either go...
Education: Assume people live 2 years: youth (year 1) and adult (year 2). Youths either go to school or work. If they go to school, they earn zero. If they work they earn $1000. As adults, everyone works. An educated adult earns $3000 while an uneducated adult earns $1800. The interest rate is 12% and the government pays the full cost of schooling at $350 per year.
Earnings
Earnings: Year 1 Year 2
A. Earnings profile: no school $1000 $1800
B. Earnings profile: with school 0 $3000
C. Earnings gain from schooling -$1000 +$1200
Therefore, calculate the present discounted value of the benefits of schooling and the rate of return for both the individual and society.
Net Private Benefit?
Private Rate of Return?
Net Social Benefit?
Social Rate of Return?
Solutions
Expert Solution
Solution:
| Given, | |||
| Considering earnings as the cash-flows at end of year. | Year 1 | Year 2 | |
| Earnings Profile (No school) | 1000 | 1800 | |
| Earnings Profile (School) | 0 | 3000 | |
| Earning gains from schooling | -1000 | 1200 | |
| Initial Investment for individual for School at start | 0 | ||
| Investment for society for School in at start | -350 | ||
| Year 0 | Year 1 | Year 2 | |
| Cashflows for individual | 0 | -1000 | 1200 |
| Cashflows for society | -350 | -1000 | 1200 |
| Interest rate | 12% | ||
| Present discounted value of schooling for individual or net private benefit: | ((-1000/(1.12)) + (1200/(1.12)^2)) - 0 | 63.77551 | |
| Private rate of return or IRR for individual | 20.00% | ||
| Present discounted value of schooling for society or net social benefit: | ((-1000/(1.12)) + (1200/(1.12)^2)) - 350 | -286.224 | |
| Social rate of return or IRR for society | -8.990% |
jeff jeffy answered 4 months agoRelated Solutions
a. Budgeted sales are 2 comma 0002,000 youth bats and 2 comma 8002,800 adult bats. b....
a.
Budgeted sales are
2 comma 0002,000
youth bats and
2 comma 8002,800
adult bats.
b.
Finished Goods Inventory on
DecemberDecember
3131
consists of
250250
youth bats at
$ 18$18
each and
520520
adult bats at
$ 17$17
each.
c.
Desired ending Finished Goods Inventory is
350350
youth bats and
400400
adultbats; FIFO inventory costing method is used.
d.
Direct materials cost is
$ 9$9
per youth bat and
$ 5$5
per adult bat.
e.
Desired ending Raw Materials Inventory...
1.) Suppose you will go to graduate school for 2 years beginning in year 4. Tuition...
1.) Suppose you will go to graduate school for 2 years beginning
in year 4. Tuition is $28,359 per year, due at the end of each
school year. What is the Macaulay duration (in years) of your grad
school tuitions? Assume a flat yield curve of 0.06. Assume annual
compounding. In the above description, if you see a flat yield
curve of 0.08 for example, then it means that the yield at all
maturities is 8%.
2.) Suppose in the...
The probability that a randomly selected 2 -year-old male chipmunk will live to be 3 years...
The probability that a randomly selected 2 -year-old male
chipmunk will live to be 3 years old is 0.98632 . (a) What is the
probability that two randomly selected 2 -year-old male chipmunk s
will live to be 3 years old? (b) What is the probability that
nine randomly selected 2 -year-old male chipmunk s will live to be
3 years old? (c) What is the probability that at least one of
nine randomly selected 2 -year-old male chipmunk s...
Assume that you are one of six thousand people who live on the small island of...
Assume that you are one of six thousand people who live on the
small island of Tap. This island is small and can only produce a
maximum of six thousand bags of corn a year (ignore technological
advances in corn production that are occurring elsewhere in the
world). The six thousand bags of corn produced are just enough for
the residents since each resident only earns enough to buy one bag
of corn a year (a pity since the Tapese...
Assume that you are one of six thousand people who live on the small island of...
Assume that you are one of six thousand people who live on the
small island of Tap. This island is small and can only produce a
maximum of six thousand bags of corn a year (ignore technological
advances in corn production that are occurring elsewhere in the
world). The six thousand bags of corn produced are just enough for
the residents since each resident only earns enough to buy one bag
of corn a year (a pity since the Tapese...
Assume that you need a new car for exactly 4 years. You can either 1)...
Assume that you need a new car for exactly 4 years.
You can either
1) lease the car for 4 years
2) purchase the car with a four-year loan and sell it after 4
years.
The dealer has a leasing arrangement where you pay $4,400 today
and $580 per month for the next four years.
If you purchase the car, you will pay it off in monthly payments
over the four years at a stated interest rate of 12...
1- Nursing Facility’s 2- Adult Day Care Assume you are responsible for the management and administration...
1- Nursing Facility’s
2- Adult Day Care
Assume you are responsible for the management and administration
of the two facilities listed above. You have to orient the newly
appointed manager by providing an overview on managing long-term
care. You also need to discuss the programs of the two
facilities.
· What are the various
multidisciplinary departments (teams) included in your facilities?
Listed Above
· Who comprise the target
population being served by the various programs provided by your
chosen facilities?...
Assume zero-coupon yields on default-free bonds are 4.00% (1 year), 4.30% (2 years), 4.50% (3 years),...
Assume zero-coupon yields on default-free bonds are 4.00% (1
year), 4.30% (2 years), 4.50% (3 years), 4.70% (4 years), 4.80% (5
years).
C) Consider a four-year, default-free bond with annual coupon
payments and a face value of $1000 that is issued at par. What is
the coupon rate of this bond?
There are (m − 1)n + 1 people in a room. Show that either there are...
There are (m − 1)n + 1 people in a room. Show that either there
are m people who mutually do not know each other, or there is a
person who knows at least n others.
The following data represent the smoking status by level of education for people 18 years old...
The following data represent the smoking status by level of
education for people 18 years old or older.
Smoking Status
Number of Years of Education current former never
<12 159 98 196
12 148 81 150
13-15 44 29 33
16 or more 32 26 40
Test whether smoking status and level of education are
independent.
a. What is the expected value of the number of Former smokers
and 13-15 Years of Education, if we assume that the two...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- 23- Celsius Corp. is conducting a capital budgeting analysis to decide whether to invest in a...
- Using energy level diagrams, predict the relative stability of a Br2 molecule as well as the...
- A 0.0038 kg leaf falls 16.8 m to the ground, where it lands with a speed...
- Problem 1: In the figure to the right, m1=20.0kg and α=53.1o . The coefficient of kinetic...
- A palindrome is a string whose reversal is identical to the string. For example, 110010011 is...
- Explain how the shape of the load duration curve for a particular system affects the selection...
- For physics discussion post. Please TYPE the response as I struggle with reading written information. Explain...
ADVERTISEMENT