You have finished college and have a degree. You already have a job lined up that pays $80,000 per year. You also have an admission offer from the MA program at a university. The MA program can be finished in 2 years and the program costs you $30,000 each year with some financial aid from the university. After you graduate with an MA, your salary would increase to $120,000. The time point that you are thinking about is 5 years. Use this information to answer the questions that follow :

a) What is your direct cost and indirect cost of pursuing your MA, assuming a discount rate of 15%?

b) Would you work or pursue your MA if the discount rate is 15%? Use Present Value calculations

c) Would you work or pursue your MA if the discount rate is 2%? Use Present Value calculations

d) Compare your answers in (b) and (c). Do you observe a difference and if yes, what does it imply?

e) In general, even though people get a bump in their salary with an MA, many people choose to just get a BA. Why? Explain in terms of differences in direct and indirect cost between individuals. To answer this question, you may assume that the salary after MA is same for everyone.