Question

You give up a full-time salary of $45,000 a year to go to school for 2 years. The total cost of going to school is $30,000. If you want to be able to recover your investment in 5 years or less, what is the minimum salary you would need to earn on earning your degree

Answer 1

Answer:

$69,000 per year

Explanation:

the total economic cost of going to college = college expenses + implicit costs

• college expenses = $30,000
• implicit costs (opportunity costs) = $45,000 x 2 = $90,000

total economic cots = $30,000 + $90,000 = $120,000 / 5 years

if you  want to recover your college costs in 5 years, you will need to recover $120,000 / 5 = $24,000 per year

so you would need to earn = $45,000 (old salary) + $24,000 = $69,000 per year

*opportunity costs are the additional costs or benefits lost from choosing one activity or investment over another alternative.