Present value of the after-cost incremental cash flows

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1) Suppose that the annual cost (tuition, fees, room, and board) to obtain a Bachelor's degree in Utah is $15,000, which is expected to grow at 5.5% per year. Assume that you begin school today and fund the education expenses through subsidized student loans at a 4% fixed interest rate. These loans will be paid off over a 15-year period following the completion of the 4-year degree. Additionally, the median salary earned with a Bachelor's degree is $65,000, while that of a High School diploma is $35,000. What is the present value of the after-cost incremental cash flows received from higher education if the appropriate discount rate is 2.75% per annum? [Round the final answer to the nearest cent]

2) Suppose your child was born today and will go to college at age 18 for four years. Total education costs amount to $20,000 per year, in today's dollars, which you anticipate will increase by 4.5% per year. You also believe that you can earn a 12% return on your investments. How much must you save/invest at the end of each year, if you want to make your last contribution payment in your child's first year of college? [Round the final answer to the nearest cent]

3) You would like to begin saving for your children's college education. You have four kids, ages 4, 5, 7, and 15. Each child will begin college at 18 and attend a public university for four years. Tuition is currently $20,000 per year and is increasing at 4.5% per year. You can earn a 7% return on your investments. How much must you save at the end of each year if you would like to make the last payment during your youngest child's last year of college? [Round the final answer to the nearest cent]

Reference no: EM133073635

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