Suppose going to college costs 20,000 a year. The average earnings of a high- school graduate are 20,000 a year. By going to college, suppose one can expect to earn 50,000 a year. Set up the expressions for the present value of benefits and costs, and the net present value of a college education if the interest rate is 10%. How does this change if the interest rate is 15%? Why is the investment in college less attractive when the interest rate is high?

Suppose going to college costs 20,000 a year. The average earnings of a high- school graduate are 20,000 a year. By going to college, suppose one can expect to earn 50,000 a year. Set up the expressions for the present value of benefits and costs, and the net present value of a college education if the interest rate is 10%. How does this change if the interest rate is 15%? Why is the investment in college less attractive when the interest rate is high?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5MC: If you are saving the same amount each month in order to buy a new sports car when the new models...

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