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28 Sep 2019
Question 4 Billy and Bob are both 50 years old and work at the same rm. Billy is a more able individual and presently earns $90,000/year; Bob earns $50,000/year. They have the opportunity to enroll in a job-training course for a one-time cost of $10,000. The raise to which they are entitled depends on how much they learn in the course. Again, since Billy is more able, he expects to earn an additional $2,000/year, while Bob expects to earn only an additional $1,000/year. Both workers have a discount rate of 5%.
a. If both workers expect to work until age 60 (i.e., ten more years), will either opt to take the course?
b. What is the minimum number of years each worker needs to work before retiring if the course is to be a wise investment?
Question 4 Billy and Bob are both 50 years old and work at the same rm. Billy is a more able individual and presently earns $90,000/year; Bob earns $50,000/year. They have the opportunity to enroll in a job-training course for a one-time cost of $10,000. The raise to which they are entitled depends on how much they learn in the course. Again, since Billy is more able, he expects to earn an additional $2,000/year, while Bob expects to earn only an additional $1,000/year. Both workers have a discount rate of 5%.
a. If both workers expect to work until age 60 (i.e., ten more years), will either opt to take the course?
b. What is the minimum number of years each worker needs to work before retiring if the course is to be a wise investment?
Paramjeet ChawlaLv8
28 Sep 2019
