Question
In: Economics
Joe decides to take a 1-year intensive course in data processing after high school graduation where...
Joe decides to take a 1-year intensive course in data processing after high school graduation where direct costs=$1,000. Forgone earnings in year 1 are $5,000 from a part-time job.
At the end of this year, Joe can work for a computer company and expects to have earnings of $18,000 at the beginning of the year after his education (discount 1 year from now), $18,500 in year 2 (discount 2 years from now) and $19,000 in year 3 (discount 3 years from now).
If he goes to work with just a high school degree, he will earn $15,500 in each of these three years (we will assume his part-time job becomes full-time).
Interest is 10%.
- What are the total costs of going to school? These are paid upfront and don’t need to be discounted.
- What is the PV of the benefits of going to school? The benefit is the extra money he earns from having the certificate. Calculate one PV stream only.
- Should Joe get the certificate? Why or why not?
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
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