A UCF graduate is getting a masters degree at night. The graduate expects to receive an annual salary of $6,000 per year more as a result of getting a masters degree. The graduate plans to work for 40 years, so he/she will earn $240,000 more in their lifetime ($6,000 x 40 years).
What is the present value of a stream of $6,000 payments for 40 years based on an annual interest rate of 7%? Assume the $6,000 is paid annually at the END of the year. By the way, if it costs say $25,000 today to get a masters degree, do you think a graduate degree is a smart economic move if your salary goes up by $6,000 per year?
$79,990, yes get the masters degree, the net present value of this decision is $54,990