1. Josh is not sure if he should attend college or not. Part of his decision will be based on the return on investment of college. He estimates that the per year cost to attend Texas Tech including room and board is $27,750. He also assumes the cost will rise by 5.5% per year. How much is a 4 year degree going to cost Josh? A. Josh recognizes that not only will he have the costs of attending school, but he will also be giving up a salary while he attends school. He figures the average salary for those with only a high school diploma is $30,000. He assumes he would receive a 2.4% cost of living raise each year. Determine how much money he will forgo while attending school. B. If Josh adds the cost of college with the salary he will forgo by attending college, he finds it will cost: in total. (Keep in mind that this does not include any interest on loans needed to pay for school.) C. To help him determine if it really is worth it to get a college education, Josh wants to see what the return on investment (ROI) will be 20 years after graduation. After some research, Josh discovers that for him career choice he can expect to earn $2 million with a degree and $900,000 without one. What is Josh's 20-year ROI? (Hint: Use TVM and solve for l/y.) D. Is this is a good ROI or not? List at least 3 other factors besides ROI that Josh should consider.
1. Josh is not sure if he should attend college or not. Part of his decision will be based on the return on investment of college. He estimates that the per year cost to attend Texas Tech including room and board is $27,750. He also assumes the cost will rise by 5.5% per year. How much is a 4 year degree going to cost Josh? A. Josh recognizes that not only will he have the costs of attending school, but he will also be giving up a salary while he attends school. He figures the average salary for those with only a high school diploma is $30,000. He assumes he would receive a 2.4% cost of living raise each year. Determine how much money he will forgo while attending school. B. If Josh adds the cost of college with the salary he will forgo by attending college, he finds it will cost: in total. (Keep in mind that this does not include any interest on loans needed to pay for school.) C. To help him determine if it really is worth it to get a college education, Josh wants to see what the return on investment (ROI) will be 20 years after graduation. After some research, Josh discovers that for him career choice he can expect to earn $2 million with a degree and $900,000 without one. What is Josh's 20-year ROI? (Hint: Use TVM and solve for l/y.) D. Is this is a good ROI or not? List at least 3 other factors besides ROI that Josh should consider.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:1. Josh is not sure if he should attend college or not. Part of his decision will be based on the return on
investment of college. He estimates that the per year cost to attend Texas Tech including room and
board is $27,750. He also assumes the cost will rise by 5.5% per year. How much is a 4 year degree
going to cost Josh?
A. Josh recognizes that not only will he have the costs of attending school, but he will also be giving
up a salary while he attends school. He figures the average salary for those with only a high
school diploma is $30,000. He assumes he would receive a 2.4% cost of living raise each year.
Determine how much money he will forgo while attending school.
B. If Josh adds the cost of college with the salary he will forgo by attending college, he finds it will cost:
in total. (Keep in mind that this does not include any interest on loans needed
to pay for school.)
C. To help him determine if it really is worth it to get a college education, Josh wants to see what the
return on investment (ROI) will be 20 years after graduation. After some research, Josh discovers that
for him career choice he can expect to earn $2 million with a degree and $900,000 without one.
What is Josh's 20-year ROI? (Hint: Use TVM and solve for l/y.)
D. Is this is a good ROI or not? List at least 3 other factors besides ROI that Josh should consider.
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Step 1: Introduction
VIEWStep 2: 1. Computation of Cost of Degree:
VIEWStep 3: A. Computation of The amount foregone by attending college:
VIEWStep 4: B. Computation of Total opportunity cost:
VIEWStep 5: C. Computation of 20-year ROI:
VIEWStep 6: D. Good ROI or not and other factors to be considered:
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