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Doug is a recent high school graduate
considering three careers that involve flowing water. He can begin work immediately at the municipal Water Department, which
would pay him (in real terms) $30,000 each year for the next 45 years. A second choice is to spend five years in college, with an
annual tuition of $25,000 per year, and become a civil engineer; this would allow him to earn $55,000 per year for the 40 years
after he graduates. The final option is to get the same civil engineering degree (just as before), spend the following 5 years getting
a Ph.D. in hydrology (with no tuition and a $15,000 annual fellowship), and then work for 35 years as a groundwater specialist
who earns $75,000 per year.
a. If the interest rate were 7 percent, which option would Doug choose? Use a spreadsheet program (your choice-Excel,
QuatroPro, whatever) to perform your calculations, and attach the output of that exercise. The top line of your output
should look like the following. Remember to start in Year 0 (i.e., the first payments are made and/or received
immediately, not one year from today) and end in Year 44.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91222499

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