Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please answer quickly this is my last question in my final and i cant figure it out. (Comprehensive Problem) Suppose that you are in the

please answer quickly this is my last question in my final and i cant figure it out.
image text in transcribed
(Comprehensive Problem) Suppose that you are in the fall of your senior year and are faced with the choice of either geting a job when you graduate or going to law school Of course, your choice is not purely financial However, to make an informed decision you would tke lo know the financlat implications of the two alternatives Lets assume that your alternatives are as follows: If you take the "get a job" roule you expect to start off with a salary of $35,000 per year. There is no way to predict what will happen h the fieure, your best guess is that your salary wil grow at 4 percent por year until you retire in 44 years. As a law student, you will be paying $25,000 per year tuision for each of the 3 years you are in graduate scheal. However, you can then expect a job with a starting salary of 570.000 por year. Moreover, you expect your salary to grow by 7 porcent per year unti your retire 39 year later Clearly. your total expected lifotime solary will be higher if you beceme a lavyor. Howtiver, the addisional future saiary is not free You wel be paying s25. 000 in luis on at the beginning of each of the 3 years of law school in addition, you will be giving up a litle more than $109.000 in lost income over the three years of las schoot $35, 000 the first year, $36.400 the second yoar and $37,856 the third year. a. To start your anatysis of whether to go to law school calculate the present yalue of the future eamings that you will realize by going droctly to wock, assume a discount rate of 12 percent b. What is the present value today of your future earnings if you decide to attend taw schaol, assuming a discount rate of 12 percent? Rermember that you will be in law schoel tor. 3 years before you start to work as a lawyer. (Hint assume that you are paid at the end of each year so that your first salary payment if you decide to go io taw school occurs A a. What is the present value of the future earnings that you wh realize by gong directy to work assuming a discount rate of 12 percen?? (Round to the nearest cent) b. What is the present value boday of your future oarnings if you decide to attend law school, assuming a discount rate of 12 percent? (Round to the nearest cent) c. If you pay your law school fuition at the beginning of each year, what is the present value of your tuition, assuming a discount raie of 12 percent

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Bitcoin For Dummies

Authors: Prypto

1st Edition

1119076137, 978-1119076131

More Books

Students also viewed these Finance questions

Question

fscanf retums a special value EOF that stands for...

Answered: 1 week ago

Question

What does the start( ) method defined by Thread do?

Answered: 1 week ago