1. Economic Trade-off of Graduate School. DeloresSotomajor hopes to ea

QUESTION

1. Economic Trade-off of Graduate School. DeloresSotomajor hopes to earn an extra $600,000 over herremaining 40-year working career by going to nightschool to obtain a masters degree. If her income projectionis correct, thats an average of $15,000 more incomea year. Deloress employer is willing to pay $45,000toward the $60,000 schooling costs, so she must pay out$15,000 of her own money.(a) What is the forgone lost future value of her$15,000 over the 40 years at 6 percent? (Hint: SeeAppendix A.1.)(b) What would be the forgone lost future value of$60,000 over 40 years if Delores had to pay allthe costs for her masters degree?
This can be solved by using the formula of future value of single cash flow: a) Future value forgone for 15000 in 40 years = Amount*(1+i)^n =¦

^40 = 154286 b)Future value forgone for 60000 over 40 years = Amount*(1+i)^n = 60000*(1+.06)^40 = 617143

ANSWER:

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