Question: Theodore is considering a 1-year training program, which charges $20,000 in tuition, to learn how to install airport-screening equipment. If he enrolls in the program,

Theodore is considering a 1-year training program, which charges $20,000 in tuition, to learn how to install airport-screening equipment. If he enrolls in the program, his opportunity cost in forgone income is the $100,000 per year he can now earn. After completing the program, he is promised a job for 5 years, with a yearly salary of

$130,000. (After 5 years, the equipment is expected to be obsolete, but Theodore plans to retire at that time anyway.)

Assume Theodore’s personal discount rate is 5 percent. Should Theodore enroll in the program? Why? (Show your calculations.)

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