Josh is graduating at the end of the academic year with a BS degree in engineering. He already had an offer with a good company for $58,000. He has learned that those who continue along a technical path in the company typically receive increases of 6% per year. Now that Josh smells the diploma and the money, he is ready to get out and make his mark in the company. Josh's family, however, have encourage him to reconsider completing a MS degree, thereby differing employment for 2 years. Josh has learned in the same company, those with an MS degree who remain on a technical path earn increases of 7.2%. With a graduate assistantship, Josh will have to apply only $8,000 per year out of his own pocket. He will be 23 when he graduates with the BS degree, 25 when he completes an MS degree, and 65 when he retires. All salaries and cost are considered to occur at the end of the year.
Based on PW of salaries and cost at Josh's TVOM of 7%, what must his minimum starting salary be to justify staying for the MS degree
The future value of a sum that has been compounding at an interest rate i for n periods is given by the equation: F = P(1 + i)(vertical-align:super)n. Future value of a sum is important to know for financial planning purposes.
Answer and Explanation:
The answer is Josh's minimum starting salary needs to be $57,985.43 to justify staying for the MS degree.
The increased earning potential of 7.2%...
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from Financial Accounting: Help and ReviewChapter 5 / Lesson 16