QuestionQuestion

An engineering student will graduate this year with a BS degree at the age of 26. He expects to make $60,000/year for the rest of his career. He is considering his options for further study for an MS degree, where he can make an additional $10,000 per year. he is also thinking of retiring at the age of 55 or 66 years.      

Option 1. Enroll in a master's degree program and pay full tuition at $40,000 and graduate in one year.

Option 2. Enroll in a master's degree program with a teaching assistantship, pay no tuition at all, and graduate in two years.

Option 3. Enroll in a master's degree program and pay full tuition at $40,000 and graduate in one year.; borrow the money with a long-term student loan to be paid out in 10 years at $5000 per year starting at the end of the first year after he receives his MS degree.

• Make a decision table based on present worth analysis (PW=PV).
• The table should include the baseline (no master's ) and the three master's options.
• Assume an inflation rate of 5 percent.
• Make a snapshot of the four alternatives after five years and after a lifetime of work retiring at either 55 or 66 years.
• Assume no tax consequences.
• Please show all your calculations in details.
• Put your results in a matrix of three rows of years of work and four columns (baseline and choices 1, 2, and 3).

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Present Worth Analysis
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