It is January 1st, 2020, you just turned 26-years-old. You are a high-school (only) graduate working only 40 hours per week -- playing video games for the remainder of the week -- and earning $20 per hour. Your wage is paid annually at the end of each year (assume 52 weeks in each year). It is a relatively safe and secure job (immune to viruses) and you plan to work at this job for the next 40 years of your life, after which you will retire at the end of age 65; obviously to play video games for the rest of your life. Also, assume that your salary (i.e. minimum wage) increases by 3% wage inflation, fixed until your retirement. Notice that it is regular (not delayed) growth. 

For this question, ignore income taxes, CPP, EI, and vacation entitlements. (Yes, totally unrealistic, but we must start somewhere.) Part A: You are considering enrolling in a full-time program of study (BA degree, college diploma, extended technical certificate, etc.) that will require you to stop working for 4 fulltime years and pay tuition of $20,000 per year for each of those 4 years (at the end of each year). Right after graduation you come back to your previous job. The benefit of this big investment in your human capital is that when you graduate at the end of age 29, your wage growth would be doubled (i.e., 6%) relative to what it would have been. Notice that your starting wage after graduation should be adjusted by the inflation during your education.

What is the Internal Rate of Return (IRR) from this investment in your human capital? Note that I would like to  (only) two digits in your answer, since anything beyond that is meaningless given all the assumptions you will have to make. 

State very clearly any-and-all further assumptions you are making in answering this question.

Answer rating: 100% (QA)

Assumptions The wage inflation is 3 per year The tuition cost is 20000 per year The wage growth afte... View the full answer