You are twenty-five years old and earn w25 = $50,000 per year

(payable at the end of the year). Your wage is growing at the rate of 3% per year. You would like to stop working at age sixtyfive.

What is your human capital worth today, assuming a valuation rate of v = 5% p.a., annual compounding? In addition, you are thinking of going back to graduate school to get an advanced degree. The program will take two years, and you expect to earn w27 = $70,000 per year when you graduate. Assuming the same wage growth rate, what is the most you are willing to pay (today) for schooling?