John is a talented artist who received an offer to go pro gymnast. He graduated fr the business school of Talent University with a 4.0 GPA and scored 826 on his MCA Having all the needed skills, John is considering a career in any of the following trac John collected information related to potential income and cost for his options. Sine he is considering average income, John divided his professional career into 5 period of earning Period 0 Occupation Period 4 Period 1 Period 2 Period 3 Neurosurgeon -20 15 20 30 Accountant 10 12 14 Artist 3 3. 3. 3. 3. Gymnast 25 10 Assume that John's discount factor d%3D0.85. Find net present value of each career what is the NPV of the most lucrative option.
John is a talented artist who received an offer to go pro gymnast. He graduated fr the business school of Talent University with a 4.0 GPA and scored 826 on his MCA Having all the needed skills, John is considering a career in any of the following trac John collected information related to potential income and cost for his options. Sine he is considering average income, John divided his professional career into 5 period of earning Period 0 Occupation Period 4 Period 1 Period 2 Period 3 Neurosurgeon -20 15 20 30 Accountant 10 12 14 Artist 3 3. 3. 3. 3. Gymnast 25 10 Assume that John's discount factor d%3D0.85. Find net present value of each career what is the NPV of the most lucrative option.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![## Career Path Analysis for John
John is a talented artist who received an offer to pursue a professional gymnastics career. He graduated from the business school of Talent University with a 4.0 GPA and scored 826 on his MCAT.
John is considering a career in one of the following paths, analyzing potential income and costs over different periods. His career evaluation is based on average income over five periods of earning. Below are the details for each occupation John is considering:
### Occupation Income Analysis
| Occupation | Period 0 | Period 1 | Period 2 | Period 3 | Period 4 |
|---------------|----------|----------|----------|----------|----------|
| Neurosurgeon | -20 | 5 | 15 | 20 | 30 |
| Accountant | 4 | 6 | 10 | 12 | 14 |
| Artist | 3 | 3 | 3 | 0 | 0 |
| Gymnast | 25 | 10 | 0 | 0 | 0 |
**Assumptions:**
- John's discount factor is \( d = 0.85 \).
- Goal: Calculate the net present value (NPV) of each career and determine the most lucrative option.
### Instructions
To calculate the NPV for each occupation:
1. Use the formula for NPV:
\[
\text{NPV} = \sum_{t=0}^{n} \frac{C_t}{(1+d)^t}
\]
Where \( C_t \) is the cash flow at time \( t \), and \( d \) is the discount factor.
2. Compare the NPVs to determine which career path is most financially rewarding for John.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2077ee5b-ff5c-4f39-beec-ae97a8707f06%2F9f53746f-bb62-4382-8de8-9964b1061204%2F7x5h5dp_processed.jpeg&w=3840&q=75)
Transcribed Image Text:## Career Path Analysis for John
John is a talented artist who received an offer to pursue a professional gymnastics career. He graduated from the business school of Talent University with a 4.0 GPA and scored 826 on his MCAT.
John is considering a career in one of the following paths, analyzing potential income and costs over different periods. His career evaluation is based on average income over five periods of earning. Below are the details for each occupation John is considering:
### Occupation Income Analysis
| Occupation | Period 0 | Period 1 | Period 2 | Period 3 | Period 4 |
|---------------|----------|----------|----------|----------|----------|
| Neurosurgeon | -20 | 5 | 15 | 20 | 30 |
| Accountant | 4 | 6 | 10 | 12 | 14 |
| Artist | 3 | 3 | 3 | 0 | 0 |
| Gymnast | 25 | 10 | 0 | 0 | 0 |
**Assumptions:**
- John's discount factor is \( d = 0.85 \).
- Goal: Calculate the net present value (NPV) of each career and determine the most lucrative option.
### Instructions
To calculate the NPV for each occupation:
1. Use the formula for NPV:
\[
\text{NPV} = \sum_{t=0}^{n} \frac{C_t}{(1+d)^t}
\]
Where \( C_t \) is the cash flow at time \( t \), and \( d \) is the discount factor.
2. Compare the NPVs to determine which career path is most financially rewarding for John.
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