In: Finance
Write a 2-3 paragraph paper evaluating the lifetime NPV of yourcollege degree and post to the discussion board
My college degree provides me with several benefits and the primary benefits of my college degree are - higher starting annual salary, higher wage growth, higher benefits, lower unemployment rate, higher labor force participation rate, and lower occupation absence rate. I am a 25 year old male and have a bachelor’s degree in finance and accounting. With a retirement age of 65 years I have around 40 years of work career ahead of me during which I will earn salary and bonuses. My starting salary is $50,000 that I am earning currently and this is expected to grow by 10% per year. Also my cost of capital is 12% and my cost of education stands at $120,000.
Thus the present value of my costs = $120,000 and the present value of my future earnings in the form of salary will be computed using the formula: P/(r-g) * [1-((1+g)/(1+r))^n] where P = $50,000, r = 12%, g = 10% and n = 40 years. Thus present value of all my future earnings = 50,000/(0.12-0.10)*[1-((1+0.10)/(1+0.12))^40 = $1,284,020. Thus the lifetime NPV of my college degree is NPV of benefits – NPV of costs = $1,284,020 - $50,000 = $1,234,020.
(2 paragraphs)