Challange yourself? Rebecca is 28 and considering going to graduate school so she sits down to calculate whether it is worth the large sum of money. She knows that her first year tuition will be $40,000, due at the beginning of the year (that is, right away). She estimates that the 2nd year of tuition would be $42,000. She also estimates that her living expenses above and beyond tuition will be $8,000 per year (assume this occurs at the end of the year) for the first year and will increase to $9000 the next year. She expects to earn $18,000 for an internship (Assume this inflow occurs one year from now). Were she to forgo graduate school she would be able to make $55,000 at the end of this year and expects that to grow 3% annually. With a graduate degree, she estimates that she will earn $85,000/year after graduation, again with annual 3% increases. Either way, she plans to work until 60 (she begins college right away). The interest/discount rate is 6%. What is the NPV of her graduate education? (Note: All cash flows except tuition payments occur at the end of the year.) 229016 275996 231472 174481
Posted on: Thu, 27 Jun 2013 05:11:34 +0000
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