Question

You have recently graduated from high school and are debating whether you should attend college or immediately enter the workforce. Assume that you can spend $50,000 today for tuition and receive your college degree in only one year. When you graduate you will receive a job that pays you $100,000 immediately and $100,000 the following year. If you begin working immediately, you can earn $35,000 today and each of the next two years. If the annual interest rate is 10%, should you go to college?

Answer 1

ANSWER:

1) If i attend college then my pw:

pw = money spend on tution fee(p/f,i,n) + salary for 2 years after college(p/a,i,n)

pw = -50,000(p/f,10%,1) + 100,000(p/a,10%,2)

pw = -50,000 * 0.9091 + 100,000 * 1.736

pw = -45,455 + 173,600

pw = 128,145

2) if i begin working immediately:

pw = salary earned for 3 years(p/a,i,n)

pw = 35,000(p/a,10%,3)

pw = 35,000 * 2.487

pw = 87,045

so it is better i attend college as the pw of attending college and getting a job is more then working immediately.