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Jennie lives for three periods. She just completed the first period of her life. Jennie is trying to decide on her future career path. She
Jennie lives for three periods. She just completed the first period of her life. Jennie is trying to decide on her future career path. She will either become a nurse or a brain surgeon.
- If she becomes a nurse, she will earn $50,000 at the end of period 2 and $100,000 at the end of period 3.
- If she becomes a brain surgeon, she will pay $100,000 now to attend school in period 2 and she will earn $300,000 at the end of period 3.
- Jennie's discount rate is 4%.
a. What is the net present discounted value (PDV) of becoming a nurse?
b. What is the net PDV of becoming a brain surgeon?
c. Which career path should Jennie choose if she wants to maximize her net PDV?
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