Question
1. One benefit of being an RPI professor is that the school will pay 75% of your childrens tuition. I have three children who will
1. One benefit of being an RPI professor is that the school will pay 75% of your childrens tuition. I have three children who will be college-age starting in 11, 13, and 15 years. RPIs current tuition for the coming academic year is $57,100. Assume that it is expected to grow at 3% each year for the foreseeable future.
(a) What is the present value of RPIs tuition benefit to me assuming that all three of my children attend RPI for four years with the tuition being payable in full annual installments at the start of each year? Assume a discount rate of 7% (for example, I will make tuition payments for my eldest child exactly 11, 12, 13, and 14 years from now).
(b) Assuming the benefit is spread equally over the next 18 years (i.e., from the end of this year until my youngest graduates in 18 years), how much of an annual increase in salary would I have to earn to compensate for the tuition benefit?
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