Jennifer has just finished high school and is deciding whether to start working or go to college.She has already been offered a job that pays $35,000 a year.Four years of college will cost $12,000 each year.She would earn an extra $20,000 each year after she graduates for the 45 years she plans on working until she retires.Jennifer should invest in college when the net present value of that investment is ______ and the internal rate of return is ______ the current interest rate.

Question

Quizplus · Accepted Answer

Jennifer should invest in college if the net present value (NPV) of the investment is positive, meaning that the present value of the future cash flows (income) from college is greater than the present value of the costs of attending college. Additionally, she should invest in college if the internal rate of return (IRR) is greater than the current interest rate because this means that the return on investment is higher than the opportunity cost of capital. Therefore, choice A is correct since a positive net present value and an internal rate of return greater than the current interest rate are necessary conditions for investing in college.

Jennifer Has Just Finished High School and Is Deciding Whether