An enginnering student has just finished the freshman year andhas received an offer of $20,000 per year in a full-time job, withprospects of salary increasing 3% per year until retirement after33 years. If employement is taken, the student will likely notfinish his engineering degree. Tuition and other costs are$10,000next year, increasing at 7% per year. A starting salary of$45,000 could be expected upon graduation from the four yearprogram. Salary increases in engineering job are estimated at 4%per year until retirement after 30 years.
On the basis of economics alone, should the student take thejob now or finish college? Analyze as two mutually exclusivealternatives and solve with present worth analisis. interest rateis 7%.