An engineering student has finished his freshman year and has been offered a full-time job with a salary of $20,000/year with prospects of his salary increasing at a rate of $1,200/year until his retirement at the end of 33 years. If he takes the job, the student will leave school and not finish his engineering degree. If he decides to stay in college, tuition and fees will be $10,000 next year and increase by 7% per year for the next three years. Upon graduation, he expects a starting salary of $45,000/year. He estimates he will receive salary increases of $3,000/year until he retires at the end of 30 years. On the basis of economics alone, should he take the job now or finish his engineering degree? Compare the two mutually exclusive alternatives using net present worth analysis and an interest rate of 7%.

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Calculate the total salary earned over 33 years 20000year for the first year increasing by 1200year ... View the full answer