Rework Exercise 1 using only one option, that of attending college. Treat the lost salary of a job as an opportunity cost of college.
Exercise 1
An engineering student has just finished the freshman year and has received an offer of $20,000 per year in a full-time job, with prospects of salary increasing 3% per year until retirement after 33 years. If employment is taken, the student will likely not finish his engineering degree. Tuition and other costs are $10,000 next Year, increasing at 7% per year. A starting salary of $45,000 could he expected upon graduation from the four year program. Salary increases in the engineering job are estimated at 4% per year until retirement after 30 years.
On the basis of economics alone, should the student take the job now or finish college? Analyze as two mutually exclusive alternatives and solve with present worth analysis. Interest rate is 7%
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