Write out first five elements of relevant stream of values

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Consider an individual aged 22 who is completing a bachelor's degree and is trying to decide whether to continue his education for an additional two years in order to obtain a Master's degree. Expected working life is through age 64. Age 23-24 earns $35,000 for bachelors and a masters degree is not applicable Age 25-29 earns $40,000 for bachelors and $48,000 for a masters degree Age 30-34 earns $44,000 for bachelors and $56,000 for a masters degree Suppose further that tuition and fees for the Master's program amounted to $19,000 per year, and books cost $1,000 per year. In addition, assume that there is an annual subsidy to the student provided through state funding in the amount of $10,000 (that is, this is part of the total cost of educating the student, but is not included in the tuition cost or any other cost paid by the student). Assume that you are using the net present value approach to evaluate the investment, with a 10% interest rate as your discount rate. What is the required condition for this investment to be desirable, given the discount rate? Write out the first five elements of the relevant stream of values to be calculated in order to assess the net present value of the investment from the private (the individual's) perspective. That is, for an investment beginning at age 23 and continuing through age 64, there will be 42 elements in the stream of values to be discounted. You need to identify the first five of these elements. Note that you do not need to calculate the exact discounted values involved, but you do need to write down the numbers (separate ones for the numerator and the denominator) that would be used to calculate the present discounted value for each of the five elements.

Reference no: EM13213797

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