What is the present value of going to college

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You are thinking of getting an MBA degree after you graduate. The degree will take you two years, each of which you could have earned $40,000 at a full-time job. You will not be able to work if you attend the MBA. The program costs $20,000 in tuition and books for the first year (paid in the present, before you start) and $80,000 on tuition and books during the second year (paid one year from now). You figure an MBA degree will earn her $620,000 during the remainder of her work-life (to keep it simple, let's say you work only for a year, which starts in two years the third time period). Paula's time preference for money is associated with a per-period interest rate of 20 percent. Approximately what is the present value of going to college?

Reference no: EM132593429

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