Marlene will live for four more time periods. In the current period, she has the option of attending college. If she does, she pays 40,000 in direct costs for the period and gives up 50,000 in earnings (what she earns for each period if she does not attend college). She knows that after college she will work get paid 70,000 in period 2, $90,000 in period 3, and $110,000 in period 4. If her discount rate is 10%, would she attend college?
In order to decide whether Marlene should attend college, we must compare the present value of both decisions.
- Don't Attend College
In this case, Marlene will receive $50,000 this period and $50,000 in each of the next 3 ...
This posting compares the present value of both decisions.