Suppose a college education is choosing between an expensive school ($200,000 over 4 years)and a less expensive school ($40,000 over 4 years)the student should

Question

Quizplus · Accepted Answer

The student should choose the more expensive school only if the present value of the difference in salary is $160,000 or more. This means that the increase in salary that the student will earn over their lifetime by attending the more expensive school should be enough to compensate for the additional $160,000 in costs. If the present value of the difference in salary is less than $160,000, then it would not make financial sense to attend the more expensive school. This analysis takes into account the time value of money and the opportunity cost of the additional $160,000 that could have been invested or used for other purposes.

Suppose a College Education Is Choosing Between an Expensive School