Question

In: Finance

Suppose that, at age 30, you might wish to leave your job and pursue a master’s...

Suppose that, at age 30, you might wish to leave your job and pursue a master’s degree. If you choose to remain at your job, your employer would pay you $76k per year until retirement, at age 55. If you go back to the university, you would have to sacrifice 2 years of income, but once you graduate, you would receive $115k per year until you retire at age 65. The master’s program you are interested in costs $22 per year.

Note: The term “k” is used to represent thousands (× $1,000).

Required: At an opportunity cost of 8%, determine the percentage difference between your most and least profitable alternatives, with the least profitable option as the basis for your calculation.

interest is $22k

correction *** the cost is $22k ($22,000) per year

Solutions

Expert Solution

The first step is to calculate the present value of both the alternatives.

The present value of remaining at the job is calculated as

Present value of remaining at the current job = $811,282.99   $ 811283

---------------------------------------------------------------------------------------------------------

The present value of going back to the university is calculated as follows

Present value of going back to the unversity = - $ 42370.37037 + $1,324,097.16

Present value of going back to the unversity = $1,281,726.79   $ 1,281,727

The difference between the two alternatives = $ 1,281,727 - $ 811283 = $ 470444

In percentage terms, the difference  between the most and least profitable alternatives is calculated as follows

The percentage difference between the most and least profitable alternatives = 57.99%

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

Suppose that, at age 30, you might wish to leave your job and pursue a master’s...
Suppose that, at age 30, you might wish to leave your job and pursue a master’s degree. If you choose to remain at your job, your employer would pay you $74k per year until retirement, at age 55. If you go back to the university, you would have to sacrifice 2 years of income, but once you graduate, you would receive $114k per year until you retire at age 55. The master’s program you are interested in costs $22k per...
Suppose that, at age 30, you might wish to leave your job and pursue a master’s...
Suppose that, at age 30, you might wish to leave your job and pursue a master’s degree. If you choose to remain at your job, your employer would pay you $74k per year until retirement, at age 55. If you go back to the university, you would have to sacrifice 2 years of income, but once you graduate, you would receive $115k per year until you retire at age 55. The master’s program you are interested in costs $22k per...
Suppose that, at age 30, you might wish to leave your job and pursue a master’s...
Suppose that, at age 30, you might wish to leave your job and pursue a master’s degree. If you choose to remain at your job, your employer would pay you $74k per year until retirement, at age 55. If you go back to the university, you would have to sacrifice 2 years of income, but once you graduate, you would receive $115k per year until you retire at age 65. The master’s program you are interested in costs $22k per...
Suppose that, at age 30, you might wish to leave your job and pursue a master’s...
Suppose that, at age 30, you might wish to leave your job and pursue a master’s degree. If you choose to remain at your job, your employer would pay you $76k per year until retirement, at age 55. If you go back to the university, you would have to sacrifice 2 years of income, but once you graduate, you would receive $117k per year until you retire at age 55. The master’s program you are interested in costs $22k per...
Suppose that, at age 30, you might wish to leave your job and pursue a master’s...
Suppose that, at age 30, you might wish to leave your job and pursue a master’s degree. If you choose to remain at your job, your employer would pay you $75k per year until retirement, at age 55. If you go back to the university, you would have to sacrifice 2 years of income, but once you graduate, you would receive $113k per year until you retire at age 55. The master’s program you are interested in costs $22k per...
Suppose that, at age 30, you might wish to leave your job and pursue a master’s...
Suppose that, at age 30, you might wish to leave your job and pursue a master’s degree. If you choose to remain at your job, your employer would pay you $75k per year until retirement, at age 55. If you go back to the university, you would have to sacrifice 2 years of income, but once you graduate, you would receive $113k per year until you retire at age 55. The master’s program you are interested in costs $22k per...
Congratulations! You have decided to leave your career as a personal tax accountant to pursue a...
Congratulations! You have decided to leave your career as a personal tax accountant to pursue a startup idea you have been thinking about for a long time. You are going to launch a new app that tracks all of your personal tax information throughout the year, so that you don’t have to load anything come tax time. You want this app to fully integrate with users payroll, investment accounts, and any other system that creates tax liability. You have validated...
The topic you wish to pursue. (1 paragraph)Identify your purpose: Why are you interested in this...
The topic you wish to pursue. (1 paragraph)Identify your purpose: Why are you interested in this topic? (2-3 paragraphs)Define and describe your intended target audience. (1 paragraph)Provide a list of 4 – 8 research questions. (list 4-8 questions)Adhere to APA formatting throughout.
Suppose you have a first job today, and you are planning to save 30% of your...
Suppose you have a first job today, and you are planning to save 30% of your annual wage at the end of the year. Your first-year annual wage will be $ 100,000 and it will grow by 3% per year. Assuming you work for 15 years in your first job, what is the present value of your saving for 15 years? The annual discount rate is given as 12% I. $ 238,455.1 II. $ 230,164.7 III. $ 158,970 IV. $...
You are 30 years old today. You wish to retire at age 65. How much money...
You are 30 years old today. You wish to retire at age 65. How much money must you deposit at the end of each year so that when you retire at age 65, you will be able to withdraw $2,500 at the end of each month until age 85? Assume you can earn interest at the rate of 5.5% compounded daily during the entire period from age 30 to 85.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT