Question

Assuming the average person works 50 weeks per year, median earnings of a college graduate are $56,850 per year compared to $33,900 per year for a high school graduate. If a college graduate works 43 years, median lifetime earnings are $2,444,500. A high school graduate can be expected to work an additional four years (47 years total), resulting in lifetime earnings of $1,593,300.

According to the College Board, an undergraduate student attending an in-state school and living on-campus should budget $25.290 per year to attend college (including tuition and fees, room and board, books, transportation, and other expenses) Using this information calculate the average total cost of a bachelor's degree that takes four years to complete, then determine whether obtnining the degree is likely to be worth the expense.

a. According to the College Bourd, a four-year bachelor's degree at an in-state school will cost, on average, worth it because the increase in lifetime earnings
b. The expense of obtaining a bachelor's degree the ________ worth it because the increase in lifetime earnings ___________ the cost

Answer 1

Answer:

a. over 100,000

b. is more than 8 times

Explanation:

a.

Cost of four-year bachelor degree = Actual cost + opportunity cost

And

Actual cost = amount spent

opportunity cost = amount lost in not doing job just after high school  

So ,

opportunity cost would be the 4 year salary of a high school graduate.

∴

Opportunity cost = 4 * yearly income of high school graduate

                             = $ 4 * 33900

                             = $ 135,600

Actual cost = 4 * yearly cost to attend college

                    = $ 4 * 25,290

                    = $ 101,160

As,

Total cost =  Actual cost + opportunity cost

                 = $ 101,160 + 135,600

                = $ 236,760

b.

Lifetime gain in pursuing bachelor degree over high school = life time earning of bachelor - lifetime earning of high school graduate

= 2,444,500 - 1,593,300 = 851,200 $

Hence,

the expenses of obtaining a bachelor degree is worth it because the increase in lifeime earning exceeds cost. [ cost = 236,760 $ , gain = 851,200 $ ]

So,

The expense of obtaining a bachelor's degree worth it because the increase in lifetime earnings is more than 8 times the cost