math for personal finance\njill is thinking about getting an mba. she will give up making $38,000 a year for…

math for personal finance\njill is thinking about getting an mba. she will give up making $38,000 a year for the 2 years it takes to complete the mba. she will also pay $35,000 in total costs to get the degree. assume she will make $75,000 a year after she gets her mba.\nevaluate the costs to determine how long it will take jill to recover her investment.

math for personal finance\njill is thinking about getting an mba. she will give up making $38,000 a year for the 2 years it takes to complete the mba. she will also pay $35,000 in total costs to get the degree. assume she will make $75,000 a year after she gets her mba.\nevaluate the costs to determine how long it will take jill to recover her investment.

Answer

Explanation:

Step1: Calculate total cost

The opportunity - cost of giving up work for 2 years is $38000\times2 = 76000$. The direct cost of getting the degree is $35000$. So the total cost $C=76000 + 35000=111000$.

Step2: Calculate annual gain

After getting the MBA, her annual income is $75000$. Before getting the MBA, her annual income was $38000$. So the annual gain $G = 75000-38000 = 37000$.

Step3: Calculate recovery time

The time $t$ to recover the investment is the total cost divided by the annual gain. So $t=\frac{C}{G}=\frac{111000}{37000}=3$.

Answer:

3 years