A WOMAN HAS A JOB WITH AN ANNUAL SALARY OF $55000.00 PER YEAR. HER SALARY IS EXP

Question

A WOMAN HAS A JOB WITH AN ANNUAL SALARY OF $55000.00 PER YEAR.
HER SALARY IS EXPECTED TO INCREASE AT 3% PER YEAR UNTIL RETIREMENT.
HER CURRENT AVERAGE TAX RATE IS 26%
SHE IS PRESENTLY 28 YEARS OLD AND EXPECTS TO WORK FOR ANOTHER 38 YEARS.
SHE WILL RECIVE A MONETARTY GIFT FRO HER MOM TO COVER THE ENTIRE TUITION FOR HER DEGREE PROGRAM.
DEGREE PROGRAM A:
REQUIRES TWO FULL YEARS OF STUDY.
CHARGES $63000.00 PER YEAR IN TUITION-MUST BE PAID AT THE BEGINNING OF EACH YEAR.
BOOKS AND OTHER SUPPLIES WILL COST $2500.00 PER YEAR FOR EACH OF THE 2 YEARS PAYABLE AT THE BEGINNING OF EACH YEAR.
ROOM & BOARD WILL COST $20000.00 PER YEAR FOR EACH OF THE TWO YEARS PAYABLE AT THE BEGINNING OF EACH YEAR.
OTHER ITEMS WILL COST $3000.00 PER YEAR FOR EACH OF THE TWO YEARS PAYABLE AT THE BEGINNING OF EACH YEAR. .
SHE EXPECTS THAT AFTER THE TWO YEAR PROGAM AND GRADUATION SHE WILL RECIVE A JOB OFFER WITH A $98000.00 SALARY WITH A $15000.00 SIGNING BONUS.
THE SALARY AT THIS JOB WILL INCREASE 4% PER YEAR.
HER NEW TAX RATE WILL BE 31% WITH THIS NEW JOB.

Her Aftertax income is $40700.00

what is the present value of tuition & expenses?

Explanation / Answer

what is the present value of tuition & expenses? Total Fee & Exp pa is sum of below :- 1. Tution Fee $63000 2. BOOKS &OTHER SUPPLIES =$2500 3. ROOM & BOARD =$20,000 4. OTHER ITEMS =$3000 --------------------------------- Total Tution fee & exp pa = $88,500 So PV of Tution fee & exp = 88500 + 88500/(1+Kd)^1 Where Kd is cost of capital whcih is not given

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