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5 Jul 2018

Using present value analysis math, discuss the cost and benefit of paying for 4 years of college. Make any assumptions you want about the market interest rates. Use math and discuss. Is going to college worth it?

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Hubert Koch
Hubert KochLv2
5 Jul 2018

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Related questions

How much is a college education worth? In the text, we supposed a college education raised a person's wage by $30,000 per year, from $40,000 to $70,000. Assume the interest rate is 3% and there is no growth in wages, then answer the following.

a) Suppose you are a high school senior deciding whether or not to go to college. What is the present discounted value of your labor income if you forgo college and start work immediately?

b) As an alternative, you could pay $20,000 per year in college tuition, attend for 4 years, and then earn $70,000 per year after you graduate. What is the present discounted value of your labor earnings under this plan? (Compute this value from the point of view of a high school senior.)

c) Discuss the economic value of a college education.

a) Read the statement below carefully, and decide whether it is true or false. And then explain your answer (whether true or false€).

Tim, a high school senior, decided to sign up with a professional baseball team, instead of going to college. This implies that, to Tim, the benefit of going to college is more than the opportunity cost of doing so.

b) Read the statement below carefully, and decide whether it is true or false. And then explain your answer (whether true or false).

As a manager, if you want to discourage your staff-members from doing a certain thing, then you'd arrange it so that - from their perspective - the cost of doing that thing would be greater than the benefit of doing it.

1) In the wake of corporate scandals at Enron, Tyco, and WorldCom, some argue that managers of large, publicly-owned firms sometimes make decisions to maximize their own welfare as opposed to that of stockholders. Does such behavior create problems in using value maximization as a basis for examining managerial decision-making?

2) Is it reasonable to expect firms to take actions that are in the public interest but are detrimental to stockholders? Is regulation always necessary and appropriate to induce firms to act in the public interest?

3) Discuss the opportunity costs of attending college for four years. Is college more or less costly than you thought it was? Explain.

4) Economists say that individuals make decisions at the margin. What does this mean?

 

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