Anton could take professional development classes this year. The classes will cost him $22,000. If he...
Anton could take professional development classes this year. The classes will cost him $22,000. If he takes the classes, he will make $1,000 a year more in his salary for the rest of his long career. If the yearly interest rate is 5%, should Anton take the classes? Explain.
Homework Answers
Present Value of perpetuity of $1000 extra income
= $1000/r where r is the interest rate on the whole
= 1000/0.05 = $20,000 is the present value of the benefit and since $22000 is the cost ,
Since PW of benefit is less than cost, he shouldn't consider the alternative or he shouldn't take the classes.
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