The cost needs to be discounted with the current interest rate. Since payment is up front, this cost is $30,000 now! The appropriate expected rate of return for cash flows (of your earnings) is 3% + 5% . 1.5 = 10.5%.

You can now use the annuity formula to determine the PV if you graduate:

With 90% probability, you will do so, which means that the appropriate risk-adjusted and discounted cash flow is about $42,067.32. The NPV of your education is therefore about $12,067.32.

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$5,000 10.5% . $47,619 98.2% $46,741.46 1 + 10.5%