According to the Pew Research Centre, college graduates (just out of college) wh
ID: 2593862 • Letter: A
Question
According to the Pew Research Centre, college graduates (just out of college) who are working full time earn about $17,500 more annually than their peers who have only a high school diploma. But not all degrees are equally useful. And given how much they cost—a residential four-year degree can set you back as much as $60,000 a year—many students end up worse off than if they had started working at 18. Hmmmm. I could skip college and make $16 per hour. Or I could go to college for the next 4 years, rack up college debt of ~$10,000 per year (with no corresponding income during those 4 years) and work for years to catch up with my friends who skipped college. To keep things simple, presume that we live in a world where no one ever gets a pay raise. How many years after graduating from high school will it take before I can finally justify going to college? Create an excel spreadsheet with the appropriate columns to help you make this calculation. (Two hints: This is a classic break-even problem, so you have to correctly identify all of your outflows and inflows. Don’t forget that opportunity cost should be taken into consideration.)
Explanation / Answer
Additional Income 17,500 Per hour 16 No of Hrs in a day 8 No of days in a week 5 No of week in a year 52 No of years additional work wo left study at 18 4 Total Additional Revenue generated=16*8*5*52*4 1,33,120 Cost P.a 10,000 Total Additional cost if study in college(10000*4) 40,000 Opportunity cost of study in college (133120+40000) 1,73,120 Additional Income if study in college 17,500 No of years opportunity cost will be recovered=173120/17500 9.89 Years Assuming no interest cost
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