What should peter do in the given problem

Reference no: EM132181675

Question: Peter has just graduated from high school. He will live for three more periods, and he is considering three alternative education-work options. He can start working right away, earning $100,000 in period 1, $110,000 in period 2 (as his work experience leads to higher productivity), and $90,000 in period 3 (as his skills become obsolete and physical abilities deteriorate). He can also go to college in period 1, spending $10,000 in that period, and then earn $150,000 in periods 2 and 3. Finally, he can get a doctorate degree after completing his college education. This last option will cost him nothing in the period when he is attending graduate school (his expenses on tuition and books will be covered by a research assistantship). After getting his doctorate, he will become a professor in a business school and earn $300,000 in period 3. The rate of discount is 20 percent. What should Peter do?

Reference no: EM132181675

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