Question

Identify the costs and income streams for your education and calculate the NPV of your investment. Is your investment worth it? Be sure to talk about your opportunity cost as well as your actual expenses/costs to attend school.

Assuming that I invested $100k in my education and obtained a position making $150k a annually.

Answer 1

The key consideration to consider here is how much were you earning before your education. So, that would be considered as your opportunity cost.

You say you invested 100,000 in education and started earnings $150,000 annually. Let us consider 10 years for the exercise. Suppose you were earnings 75,000 before education. This 75,000 is your opportunity cost each year.

Year	Cost of Eduction	Opportunity Cost	New Salary	Net Cash flow
0	-100000	-75000		-175000
1		-75000	150000	75000
2		-75000	150000	75000
3		-75000	150000	75000
4		-75000	150000	75000
5		-75000	150000	75000
6		-75000	150000	75000
7		-75000	150000	75000
8		-75000	150000	75000
9		-75000	150000	75000
10		-75000	150000	75000
NPV at 10%				$ 285,842.53

Here we have the cost of education at happens in year 0. Opportunity cost of earlier salary of 75,000 for each year from 0 to 10 and new salary from 1 to 10.

As we see, we get a positive net present value (NPV) when we consider the interest rate to be 10%. Hence we can say that the investment is worth it since the NPV is positive