Question
You are a freshman. If you take out a student loan, you want to take out $160,000 right now, and you have to start paying
You are a freshman. If you take out a student loan, you want to take out $160,000 right now, and you have to start paying it back at the end of the year (at t =1). you want to make equal payments annually.
d) If you make $80,000 per year, for 40 years, starting at t =5, what is the NPV of going to college? The interest rate is 7%. (1 point)
e) What is the payback period? (1 point)
f) What is the discounted payback period? (1 point)
g) If you know you could have made $30,000 per year for four years instead of going to college, what is the new NPV? What kind of cost is this? (2 points)
h) If you paid $5,000 last year for all the SAT prep classes, a private tutor, books, and application fees, what is your NPV (using the scenario from part d))? What kind of cost is this?
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