Question

1. The median annual earnings for someone with only a High School Degree is about $35,000 per year, which you estimate to be the equal-series amount you would earn without the engineering degree. Assume you would start work right out of High School and continue to work for 40 years before retirement. Assume your job health insurance and retirement benefits are the same as a job with a college degree. What is the estimated Future Equivalent Value (before tax) from your earnings potential over 40 without the college education with a 5% MARR?

Answer 1

Annual Earnings only with High School Degree = $35,000 (per year)

Now you started working after the High School and worked for 40 years

So Number of years (n) = 40 years

MARR (rate of interest) = 5%

What is the estimated Future Equivalent Value from your earnings without the college education?

Step - 1

We have to calculate the Future value of annual series of cash flow.

Step - 2

Compound interest factor to be used is (F/A, 5%, 40)

N = 40 years

Interest = 5%

Annual earnings is given = $35,000

Step - 3

Putting the figures in the formula

F = A (F/A, 5%, 40)

F = $35,000 (F/A, 5%, 40)

The value (F/A, 5%, 40) from the table is 120.7998

Putting the value in the above factor

F = $35,000 (120.7998)

F = $4,227,993

The estimated Future Equivalent Value (before tax) from your earnings potential over 40 years without the college education with a 5% MARR will be $4,227,993