Personal Finance (MindTap Course List)
13th Edition
ISBN: 9781337099752
Author: E. Thomas Garman, Raymond Forgue
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 2, Problem 1FPC
(a)
Summary Introduction
To find: The better job comparing present job with the offered job.
Introduction: Present value of the amount refers to the current value of future cash flows that are expected to be received at future date and specified rate.
(b)
Summary Introduction
To determine: Whether the Person B should take new job along with three reasons as a justification.
Introduction: Present value of the amount refers to the current value of future cash flows that are expected to be received at future date and specified rate.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Victor hernandez Considers a Career Change
Victor is somewhat satisfied with his sales career and has always wondered about a career as a teacher in a public school. He would have to take a year off work to go back to college to obtain his teaching certificate, and that would mean giving up his $53,000 salary for a year. Victor expects that he could earn about the same income as a teacher.
(a) What would his annual income be after 10 years as a teacher if he received an average 3 percent raise every year? (Hint: Use Appendix A.1.)
(b) Victor also could earn $4,000 each year teaching during the summers. What is the accumulated fu- ture value of earning those annual amounts over 10 years assuming a 5 percent raise every year? (Hint: Use Appendix A.3.)
Victor is somewhat satisfied with his sales career and has always wondered about a career as a teacher in a public school. He would have to take a year off work to go back to college to obtain his teaching certificate, and that would mean giving up his $52,000 salary for a year. Victor expects that he could earn about the same income as a teacher. Round your answers to the nearest dollar.
1. What would his annual income be after 10 years as a teacher if he received an average 3 percent raise every year? Round Future Value of a Single Amount in intermediate calculations to four decimal places.
2.
Answer the following problems and explain it step by step:
1. A man who is 30 years old at the start of the year, is considering getting an MFM degree. He currently earns $40,000 per year and expects to continue earning that amount for the rest of his working life (until age 65). He will give up his income for two years and will pay $20,000 per year in tuition, if he attends business school. In exchange, he expects a raise in his salary after completing his MFM. Assume that the post-graduation salary grows at a 5% annual rate and that the discount rate is 8%. What is the minimum expected starting salary after graduation for him that makes attending business school a positive-NPV investment? (Assuming that all cash flows happen at the end of each year.)
2. Bob and Rose are both 62 years old and plan to retire in 3 years. They will receive $5,000 per month after taxes from pension plans and $1,000 per month after taxes from Social Security after retirement. Regrettably, their living…
Chapter 2 Solutions
Personal Finance (MindTap Course List)
Ch. 2.1 - Prob. 1CCCh. 2.1 - Prob. 2CCCh. 2.1 - Prob. 3CCCh. 2.1 - Prob. 4CCCh. 2.2 - Is college worth the cost? Why or why not?Ch. 2.2 - Prob. 2CCCh. 2.2 - Prob. 3CCCh. 2.3 - Prob. 1CCCh. 2.3 - Give examples of how to identify specific job...Ch. 2.3 - Prob. 3CC
Ch. 2.3 - Explain how to compare salary and living costs in...Ch. 2.3 - Prob. 5CCCh. 2 - Economic Trade-off of Graduate School. Jessica...Ch. 2 - Prob. 2DTMCh. 2 - Prob. 3DTMCh. 2 - Prob. 4DTMCh. 2 - Prob. 1FPCCh. 2 - Prob. 2FPCCh. 2 - Prob. 3FPCCh. 2 - Prob. 4FPCCh. 2 - Prob. 5FPCCh. 2 - Cover Letter. Review Figure 2-6 on page 59 and...Ch. 2 - Prob. 6AIP
Knowledge Booster
Similar questions
- Jenny Jenks has researched the financial pros and cons of entering into a 1-year MBA program at her state university. The tuition and needed books for a master's program will have an upfront cost of $51,000. If she enrolls in an MBA program, Jenny will quit her current job, which pays $50,000 per year after taxes (for simplicity, treat any lost earnings as part of the upfront cost). On average, a person with an MBA degree earns an extra $21,000 per year (after taxes) over a business career of 39 years. Jenny believes that her opportunity cost of capital is 5.3%. Given herestimates, find the net present value (NPV) of entering this MBA program. Are the benefits of further education worth the associated costs? The net present value (NPV) of entering this MBA program is Are the benefits of further education worth the associated costs?arrow_forwardSuppose that, at age 30, you might wish to leave your job and pursue a master’s degree. If you choose to remain at your job, your employer would pay you $74k per year until retirement, at age 55. If you go back to the university, you would have to sacrifice 2 years of income, but once you graduate, you would receive $117k per year until you retire at age 55. The master’s program you are interested in costs $22k per year. Note: The term “k” is used to represent thousands (× $1,000). Required: At an opportunity cost of 8%, determine the percentage difference between your most and least profitable alternatives, with the least profitable option as the basis for your calculation.Answer% Intermediate calculations must be rounded to 3 decimal places (at least). Input your answer as a percent rounded to 2 decimal places (for example: 28.31%).arrow_forward1. Josh is not sure if he should attend college or not. Part of his decision will be based on the return on investment of college. He estimates that the per year cost to attend Texas Tech including room and board is $27,750. He also assumes the cost will rise by 5.5% per year. How much is a 4 year degree going to cost Josh? A. Josh recognizes that not only will he have the costs of attending school, but he will also be giving up a salary while he attends school. He figures the average salary for those with only a high school diploma is $30,000. He assumes he would receive a 2.4% cost of living raise each year. Determine how much money he will forgo while attending school. B. If Josh adds the cost of college with the salary he will forgo by attending college, he finds it will cost: in total. (Keep in mind that this does not include any interest on loans needed to pay for school.) C. To help him determine if it really is worth it to get a college education, Josh wants to see what the…arrow_forward
- Allison is contemplating a job offer with an advertising agency where she will make $54 000 in her first year of employment. Alternatively, Allison can begin to work in her father's business where she will earn an annual salary of $38 000. If Allison decides to work with her father, the opportunity cost would be?arrow_forwardOne aspect of obtaining an engineering education is the prospect of improved future earnings in comparison to non-engineering graduates. Sharon Shay estimates that her engineering education has a $85,000 equivalent cost at graduation. She believes the benefits of her education will occur throughout 25 years of employment. She thinks that during the first 8 years out of college, her income will be higher than that of a non-engineering graduate by $25,000 per year. During the subsequent 10 years, she projects an annual income that is $35,000 per year higher. During the last 17 years of employment, she estimates an annual salary that is $52,000 above the level of the nonengineering graduate. If her estimates are correct, what rate of return will she receive as a result of her investment in an engineering education?arrow_forwardMichael Scott is 30 years old at the beginning of the year and is thinking about getting an MBA. Michael is currently making $40,000 per year and expects the same for the remainder of his working years (until age 65). If he goes to a business school, he gives up his income for two years and, in addition, pays $20,000 per year for tuition. In return, Michael expects an increase in his salary after his MBA is completed. Suppose that the post-graduation salary increases at a 5% per year and that the discount rate is 8%. What is minimum expected starting salary after graduation that makes going to a business school a positive-NPV investment for Michael? For simplicity, assume that all cash flows occur at the end of each year. This is about time value of money, need excel for formula and solution, u can use shortcut in excel if applicable like PMT NPER and etc.arrow_forward
- Michael Scott is 30 years old at the beginning of the year and is thinking about getting an MBA. Michael is currently making $40,000 per year and expects the same for the remainder of his working years (until age 65). If he goes to a business school, he gives up his income for two years and, in addition, pays $20,000 per year for tuition. In return, Michael expects an increase in his salary after his MBA is completed. Suppose that the post-graduation salary increases at a 5% per year and that the discount rate is 8%. What is minimum expected starting salary after graduation that makes going to a business school a positive-NPV investment for Michael? For simplicity, assume that all cash flows occur at the end of each year.arrow_forwardSusan is trying to decide whether or not to attend college during the next 12-week session. She has the following options: 1. Attend college full-time at a cost of $1,200 2. Attend college part-time at a cost of $500 and work part-time earning $1,900 3. Work full-time earning $4,900 What is Susan's incremental profit if she chooses option 3 over option 2?arrow_forwardMaria has a choice between two job offers. The first is in Ithaca and pays $55,000.00 annually. The second job is in Memphis and has a base pay of $45,000.00 with a 10.00% chance of earning an annual bonus of $20,000.00. In which city will Maria, a risk-neutral person, work if the selection is based only on earnings? Ithaca Part 2 ( Feedback See Hint Maria would be indifferent between these two offers if the probability of obtaining the bonus was 0.5 %. (Round to the nearest percent.)arrow_forward
- Which of the following scenarios would be considered an EXCEPTION to the rule that people on average make more money as they obtain higher levels of education? a.Julia graduates from a state college with a degree in business and is hired by an insurance company to sell automobile insurance. The company pays Julia an annual salary of $64,000. b. A college dropout starts a new social media technology company and sells the company and its new technology to a venture capital firm for $50 million dollars making him an instant multi-millionaire. c. Dan is a high school graduate and decides he does not want to go to college. He finds a full-time job loading and unloading trucks in a local warehouse that pays him $38,000 per year. d. A chemical engineer with a Ph.D. in biochemistry is paid $200,000 per year to develop new fuels for vehicles that have lower carbon emissions in the atmosphere.arrow_forwardYour son has come to you for advice. He is about to enter college and has two options open to him. His first option is to study pharmacy. If he does this, his pharmacy study would cost him $30,000 a year for sevenyears. Having obtained this, he would work for two years to save money for graduate school: in the first year he would earn $40,000, in the second year he would earn $50,000. He would then go to geta MBA, which will cost $45,000 a year for two years. After that he will be fully qualified and can earn $100,000 per year for 30 years.His other alternative is to study accounting. If he does this, he would pay $35,000 a year for four years and then he would earn $50,000 per year for 37years. The effort involved in the two careers is the same, so he isonly interested in the earnings the jobs. provide. All earnings and costs are paid at the end of the year. What advice would you give him,if the market interest rate is 6percent?arrow_forwardYour son has come to you for advice. He is about to enter college and has two options open to him. His first option is to study pharmacy. If he does this, his pharmacy study would cost him $30,000 a year for sevenyears. Having obtained this, he would work for two years to save money for graduate school: in the first year he would earn $40,000, in the second year he would earn $50,000. He would then go to geta MBA, which will cost $45,000 a year for two years. After that he will be fully qualified and can earn $100,000 per year for 30 years.His other alternative is to study accounting. If he does this, he would pay $35,000 a year for four years and then he would earn $50,000 per year for 37years. The effort involved in the two careers is the same, so he isonly interested in the earnings the jobs. provide. All earnings and costs are paid at the end of the year. What advice would you give him,if the market interest rate is 6percent? (Note: This question is worth more)a.Tell him to choose…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education