You and your spouse are not on the same page. You want to go back to school and obtain your master's degree to allow you more career options, and your spouse wants you to continue with your current job, get experience and move up within the company ranks. You believe the master's degree will pay off in the long run. The cost of borrowing would be 6%, and you have a current tax rate of 22%. If you obtain your master's degree and earn more money, your tax rate will increase to 24%. The following information pertains to the two different career paths.
*The master's earning is considered a deferred annuity.
Instructions
a. What is the present value of each option, and should you spend the two years to get your master's degree?
b. If the borrowing costs you 8%, what is the present value of the future cash flows?
c. Will it be beneficial for you to obtain your master's degree using the 6% borrowing rate? 8% borrowing rate.

Question

You and your spouse are not on the same page. You want to go back to school and obtain your master's degree to allow you more career options, and your spouse wants you to continue with your current job, get experience and move up within the company ranks. You believe the master's degree will pay off in the long run. The cost of borrowing would be 6%, and you have a current tax rate of 22%. If you obtain your master's degree and earn more money, your tax rate will increase to 24%. The following information pertains to the two different career paths. 
  *The master's earning is considered a deferred annuity.
Instructions
a. What is the present value of each option, and should you spend the two years to get your master's degree?
b. If the borrowing costs you 8%, what is the present value of the future cash flows?
c. Will it be beneficial for you to obtain your master's degree using the 6% borrowing rate? 8% borrowing rate.

Quizplus · Accepted Answer

The Answer of You and your spouse are not on the same page. You want to go back to school and obtain your master's degree to allow you more career options, and your spouse wants you to continue with your current job, get experience and move up within the company ranks. You believe the master's degree will pay off in the long run. The cost of borrowing would be 6%, and you have a current tax rate of 22%. If you obtain your master's degree and earn more money, your tax rate will increase to 24%. The following information pertains to the two different career paths. 
  *The master's earning is considered a deferred annuity.
Instructions
a. What is the present value of each option, and should you spend the two years to get your master's degree?
b. If the borrowing costs you 8%, what is the present value of the future cash flows?
c. Will it be beneficial for you to obtain your master's degree using the 6% borrowing rate? 8% borrowing rate.

You and Your Spouse Are Not on the Same Page