Reference no: EM131346420
A high school graduate has to decide between working and going to college. If he works, he will work for the next 50 years of his life. If he goes to college, he will be in college for 5 years, and then work for 45 years. In this model, the rate of discount that equates the lifetime present value of not going to college and going to college is 6.851% when the cost of each year of college is $20,000, each year of non-college work pays $38,000, and each year of post-college work pays $62,000. For each of the parts below, discuss how the rate of discount that equalizes the two options would change and who would make a different schooling decision based on the change. (1) Each year of college still costs $20,000 and each year of post-college work still pays $62,000, but each year of non-college work now pays $40,000. (2) Each year of college still costs $20,000 and each year of non-college work still pays $38,000, but each year of post-college work now pays $80,000. (3) Each year of non-college work and post-college work still pays $38,000 and $62,000 respectively, but now each year of college costs $30,000. (4) Each year of college still costs $20,000. The first year of non-college work pays $38,000 but then increases by 3 percent each year thereafter. The first year of post-college work pays $62,000 but then increases by 5 percent each year thereafter.
Interpretation based on coefficient of determination
: A career counselor wishes to estimate, based on the following sample data, the mean increase in the annual salary of people (in thousands of dollars) per additional year of education pursued. Years, x 12 13 14 15 16 17 Salary, y 25 31 43 52 58 60 Whi..
|
Which is the coefficient of determination
: A career counselor wishes to estimate, based on the following sample data, the mean increase in the annual salary of people (in thousands of dollars) per additional year of education pursued. Years, x 12 13 14 15 16 17 Salary, y 25 31 43 52 58 60 Usi..
|
Is the taxable income positive or negative
: Compute the cash flow, tax flow, and after cash flow for the following real estate investment property. ompute Tax Flow (Taxable Income or Less on this property). Is the taxable Income Positive or Negative?
|
Find the net advantage to leasing showing all steps
: LEASE OR BUY: A firm needs assembly line equipment for a new factory and is deciding if they should lease or buy the equipment. The project is expected to last 5 years, and the firm has a tax rate of 40 percent. Find the net advantage to leasing (NAL..
|
Decide between working and going to college
: A high school graduate has to decide between working and going to college. If he works, he will work for the next 50 years of his life. If he goes to college, he will be in college for 5 years, and then work for 45 years. The first year of post-colle..
|
What is the approximate yield to call for the investors
: Four years ago, your firm issued $1,000 par, 25-year bonds, with a 7 percent coupon rate and a 10 percent call premium. If these bonds are now called, what is the approximate yield to call for the investors who originally purchased them? If these bon..
|
What is the capilitaztion rate adjusted for recapture
: If the net income after all operating expenses but before capital recapture from a small apartment house is estimated to be $48,000. How much would an investor be willing to pay for the porperty if first mortgages are available for 75% the purchase p..
|
Assume required rate of return on bond
: What is the value of a bond that has a par value of $1,000, a coupon rate of 9.41 percent (paid annually), and that matures in 18 years? Assume a required rate of return on this bond is 10.05 percent.
|
Common stock valuelong dash—variable growth
: Common stock valuelong dash—Variable growth Personal Finance Problem. Home Place? Hotels, Inc., is entering into a? 3-year remodeling and expansion project. The construction will have a limiting effect on earnings during that? time, but when it is? c..
|