Your cousin brother Bobby has turned 18 and is contemplating future career alternatives based on the probable salaries to be earned. He seeks your advice. You suggest that it would be proper to decide based on present worth of the alternatives. Expenses occur at BOY and income occurs at EOY. The alternatives are presented below.
Go directly to work and continue until age 65, starting annual salary $10,000 per increasing 5% per year.
Invest two years and $6,000 per year at Community College education. Work remaining years until age 65 years. Starting annual salary of $14,000 per year increasing 6 % per year.
Invest four years at College and pay tuition of $6,000 per year for education. Work remaining years until age 65, starting annual salary of $20,000 per year increasing 8% per year.
Invest 5 years in graduate program at College and pay tuition of $6,000 for a graduate degree and earn starting salary of $22,000 per year increasing 10% per year. Assume interest rate, i=10%.