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Ali is trying to decide whether to go to the university. The university education requires four years and each year costs 20 000 TLs. After
Ali is trying to decide whether to go to the university. The university education requires four years and each year costs 20 000 TLs. After graduation, he will have a job that pays 60 000TL per year for the rest of his life. If he does not go to the university, he will start working immediately. For the first three years he will earn 30 000TL per year. For the next three years, he will earn 45 000TL per year. For the rest of his life, he will earn 60 000TL per year. Assume that the interest rate is 10%. (Hint 1: After year 10, income streams are identical. You do not need to consider the whole lifetime.) (Hint 2: Ali is considering to start the university next year.) 7. What is the present discounted value of the cost of university education? a) 80 000 b) 63 397.31 c) 800 000 d) 54 641.08 8. What is the present discounted value of the earning stream implied by getting a university education? a) 178 482.1 b) 266 042.3 c) 104 096.7 d) 115 084.8 9. What is the net present discounted value of the income stream implied by getting a university education? a) 178 482.1 b) 266 042.3 c) 104 096.7 d) 115 084.8 10. What is the present discounted value of the income stream implied by NOT getting a university education? a) 133 861.6 b) 266 042.3 c) 104 096.7 d) 70 464.3 11. Given your answers to questions 7 to 10, is receiving a university education a good investment decision? a) Yes, education is a good investment decision. a) No, education is not a good investment decision
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