Sally is trying to select the best option for her to follow in the future. Her two options are 1) start working full-time right after high school or 2) work part-time while attending college full-time.

The cost that Sally would have to pay for each option today would be $47,120 to start working right after college (some training and certificates were needed) or $50,000 to attend college. The cash flows for each option are as follows:

Annual Cash inflows	Work after High School	Attend College
Year 1	10,000	2,000
Year 2	10,000	2,000
Year 3	10,000	2,000
Year 4	10,000	2,000
Year 5	10,000	40,000
Year 6	10,000	50,000
Year 7	10,000	60,000

Assuming a cost of capital of 8% and cash received at the end of each period, calculate the following items and state which option would be best for each item:

a. Payback Period

b. Net Present Value

c. Internal Rate of Return:

a. For the Work after high school option, come up with the actual Internal Rate or return.

b. For the Attend College option, figure out the two nearest whole rates that are the closest to the actual internal rate of return, ex: if the cost of capital is 8% and the NPV is positive, you would test different interest rates above 8%, like 10%, 11%, etc. until the net present value turns negative.

d. Which option do you suggest Sally take given the above calculations? Please explain.