Josie has an undergraduate degree in economics and has been working as a utility rate analyst at the local electricity utility.If she continues on her present career path,the present value of her lifetime earnings is $250,000.If she takes two years off and gets an MA degree in economics,the present value of her lifetime earnings is $275,000.The annual cost of an MA degree in economics is $15,000 and the interest rate is 8%.Assume that school fees are paid at the beginning of the year.
-Refer to the information above.Suppose that the present value of Josie's earnings with the MA degree in economics rises to $290,000 and the interest rate rises to 12%.Josie will choose to

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With an MA degree in economics, Josie's lifetime earnings increase from $250,000 to $275,000, which means that the present value of the earnings from getting an MA in economics is $25,000. However, the cost of getting the degree is $15,000, so the net present value of getting an MA in economics is $10,000. Since the interest rate is 8%, getting the degree is profitable, as the NPV of the degree is positive.

If we assume that the present value of her earnings with the MA degree in economics is $290,000 and the interest rate rises to 12%, the net present value of getting an MA in economics would be $20,000 ($290,000 - $15,000 at a 12% interest rate). Therefore, getting an MA in economics is still profitable, and Josie should choose to get the degree.

Josie Has an Undergraduate Degree in Economics and Has Been