Calculate the discounted cost

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Laura has an undergraduate degree in economics and has been working as a utility rate analyst at the local electricity utility. If she continues on her present career path, the present value of her lifetime earnings is $250,000. If she takes two years off and gets an MA degree in economics, the present value of her lifetime earnings is $275,000. The annual cost of an MA degree in economics is $15,000 and the interest rate is 8%. Assume that school fees are paid at the beginning of the year.

a. Calculate the discounted (present value) cost of Laura's graduate degree in economics.

b. Calculate the discounted (present value) benefit of Laura's benefit of getting a graduate degree.

c. Based on the discounted (present value) benefit and cost of acquiring a MA degree in economics, should Laura get the MA degree?

d. Suppose that the present value of Laura's earnings with the MA degree in economics rises to $290,000 and the interest rate rises to 12%. Should Laura get the MA degree?

Reference no: EM13838030

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