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Fall 2014 1) A young college graduate just turned 21 is contemplating future career alternative based on the probable salaries to be earned. Which of
Fall 2014 1) A young college graduate just turned 21 is contemplating future career alternative based on the probable salaries to be earned. Which of the alternatives yield the higher present worth (assume interest rate 10%, expenses occur at BOY, while income occurs at EOY)? a) Go straight to work at the HVAC company in NY city and continue until age 70, starting annual salary$50,000 per year increasing 5% per year. b) Invest two years for MS with tuition of $25,000 per year in Grad school. After graduation starting annual salary is $65,000 per year and increasing 10% per year till retirement at 70 years. Estimate the salary at 70 years of age. c) Go to Ph.D. program and earn Ph.D. in 5 years. He is likely to get scholarship of $35,000 and that is sufficient for tuition of the same amount. He is expected to join a famous research lab earning a yearly salary of $75,000 and it is likely to increase by 12% till retirement at 70 years. Estimate the last salary. (40)
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