Question

James has a job with a current salary of $42,000. He wants to earn a college degree that will take him 2 years to complete and it will cost $28,000 per year. He will go to school full time and will not be able to work. Upon graduation, James' new salary will be $56,000 per year. How many years will it take James to recover his investment? a. 1.3 years b. 2.5 years c. 10 years d. 20 years. Please select the best answer from the choices provided A B C D

Answer 1

b. 2.5 years

Step-by-step explanation:

In order to go to school, James would be giving up his job which pays $42,000 per year. For the two years, he would be giving up- $42,000 × 2 = $84,000

The cost of school for the two years = $28,000 x 2 = $56,000

Total investment = $84,000 + $56,000 = $140,000

Time taken to recover investment =

$140,000 / $56,000 = 2.5 years

I hope my answer helps you

Answer 2

C) 10 years

Step-by-step explanation:

James economic cost of attending college = tuition + opportunity cost = ($28,000 x 2 years) + ($42,000 x 2 years) = $56,000 + $84,000 = $140,000

After he graduates, his salary should increase to $56,000, which means he will earn $56,000 - $42,000 = $14,000 more per year

It will take James = $140,000 / $14,000 = 10 years to recover his investment