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Using Present Value to compare different levels of education and their relative effects.

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Presentation on theme: "Using Present Value to compare different levels of education and their relative effects."— Presentation transcript:

1 Using Present Value to compare different levels of education and their relative effects

2  Is College Worth it?  Are they better off?  Present value.

3  A Stable Economy Constant CPI/Inflation. Constant Wage Increases. No major recessions.  Job Security Always employed. Job availability out of college. Retirement at age 65.

4  College Assumptions: Starting school at 18 years of age. University of Akron representative of average college. Tuition frozen. 4 Years of college for BS degree.

5 W 0 = Average Starting Wage g = Average Wage Increase d = Average Inflation n = Number of years

6  Calculation of starting wage.  Calculation of wage increases.  Calculation of inflation.  Number of years used. Average Inflation Rate:2.65% Average Wage Increases for High School Graduates:3.54% Average Wage Increases for College Graduates:3.98% Average Wage Increase for Master's:4.10%

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8  Externality  External Benefit  Preferences of the Consumer  Maximizing Utility  Opportunity Costs  Implicit Costs  Explicit Costs

9  Greater understanding of world around them  Scholarships  Company’s Expense  Social Status  Job security  College Experience

10  Assumptions:  Two years to complete Master’s Degree  Took average of credit hours  University of Akron rates  Assumed age was (Under 24 a Master’s is rare) With College BS Degree High School GraduateMaster's Degree Total Wages Until Age 65:$1,485,450.26$952,778.03$3,125, Difference in Lifetime Wages:$532, $532,672.23$1,639, Total Wages for first 12 Years:$188,999.48$207,614.30$304,749.29

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13  Money POV: it is worthwhile, however:  The ultimate decision lies with the consumer.


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