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2. From the College Scorecard, median annual cost of attending college is $12,871. Median salary for college attendees is $58,880 (using past data based on tax data instead of surveys). Median salary of someone who does not attend college is roughly $30,336. Suppose everyone retires at age 65, everyone leaves high school at age 18, and college lasts 4 years. Within the same year, costs and earnings arrive simultaneously. a. What is the present discounted value of working immediately instead of going to college if the discount rate is 0.05 (R=1(1.05))? What is the present discounted value of going to college? Financially speaking, is going to college a good deal (assuming you would be continuously working and no wage growth)? Hint: 1+R+R²+..+R46=(1-R47)/(1-R). 1+R+R²+R³=(1-R*)/(1-R). Rª+R$+...+R46=(R4- R47)/(1-R).

2. From the College Scorecard, median annual cost of attending college is $12,871. Median salary for college attendees is $58,880 (using past data based on tax data instead of surveys). Median salary of someone who does not attend college is roughly $30,336. Suppose everyone retires at age 65, everyone leaves high school at age 18, and college lasts 4 years. Within the same year, costs and earnings arrive simultaneously. a. What is the present discounted value of working immediately instead of going to college if the discount rate is 0.05 (R=1(1.05))? What is the present discounted value of going to college? Financially speaking, is going to college a good deal (assuming you would be continuously working and no wage growth)? Hint: 1+R+R²+..+R46=(1-R47)/(1-R). 1+R+R²+R³=(1-R*)/(1-R). Rª+R$+...+R46=(R4- R47)/(1-R).

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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2. From the College Scorecard, median annual cost of attending college is $12,871. Median salary for college attendees is $58,880 (using past data based on tax data instead of surveys). Median salary of someone who does not attend college is roughly $30,336. Suppose everyone retires at age 65, everyone leaves high school at age 18, and college lasts 4 years. Within the same year, costs and earnings arrive simultaneously. a. What is the present discounted value of working immediately instead of going to college if the discount rate is 0.05 (R=11.05))? What is the present discounted value of going to college? Financially speaking, is going to college a good deal (assuming you would be continuously working and no wage growth)? Hint: 1+R+R2+...+R46=(1-R47)/(1-R). 1+R+R2+R³=(1-R*)/(1-R). Rª+R$+...+R46=(R4- R47)/(1-R). b. What is the present discounted value of working immediately instead of going to college if the discount rate is 0.15 (R=1(1.15))? What is the present discounted value of going to college? Financially speaking, is going to college a good deal (assuming you would be continuously working and no wage growth)? c. Why might salaries of college graduates be higher than salaries of college attendees? Briefly describe at least two reasons. d. Now suppose you are entering your last year of college. You would have to pay 1 year of tuition and forgo 1 year of salary at $50,500 to complete your degree. If you complete your degree, you will earn $62,200. Maintain the high discount rate (R=1/1.15). You anticipate working 44 years if you work instead of going to college (43 years if you go to college). Financially speaking, is going to college a good deal (assuming you would be continuously working and no wage growth)?
Transcribed Image Text:2. From the College Scorecard, median annual cost of attending college is $12,871. Median salary for college attendees is $58,880 (using past data based on tax data instead of surveys). Median salary of someone who does not attend college is roughly $30,336. Suppose everyone retires at age 65, everyone leaves high school at age 18, and college lasts 4 years. Within the same year, costs and earnings arrive simultaneously. a. What is the present discounted value of working immediately instead of going to college if the discount rate is 0.05 (R=11.05))? What is the present discounted value of going to college? Financially speaking, is going to college a good deal (assuming you would be continuously working and no wage growth)? Hint: 1+R+R2+...+R46=(1-R47)/(1-R). 1+R+R2+R³=(1-R*)/(1-R). Rª+R$+...+R46=(R4- R47)/(1-R). b. What is the present discounted value of working immediately instead of going to college if the discount rate is 0.15 (R=1(1.15))? What is the present discounted value of going to college? Financially speaking, is going to college a good deal (assuming you would be continuously working and no wage growth)? c. Why might salaries of college graduates be higher than salaries of college attendees? Briefly describe at least two reasons. d. Now suppose you are entering your last year of college. You would have to pay 1 year of tuition and forgo 1 year of salary at $50,500 to complete your degree. If you complete your degree, you will earn $62,200. Maintain the high discount rate (R=1/1.15). You anticipate working 44 years if you work instead of going to college (43 years if you go to college). Financially speaking, is going to college a good deal (assuming you would be continuously working and no wage growth)?
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