Cindy is considering going to law school. If she does, she will spend $70,000 on tuition and books to get a college education (during the first time period), $140,000 on tuition and books to get a law degree (during the second time period), and her law degree will earn her $700,000 during the remainder of her work-life (during the third time period). Cindy's time preference for money is associated with a per-period interest rate of 10 percent. Approximately what is Cindy's present value of obtaining a law degree

$346,581.52

Explanation:

we need to use the present value formula to solve this:

present value = future value / (1 + r)ⁿ

the present value of tuition and books will be negative (since they are a cash outflow)

PV = -70,000 / (1 + 0.1) = -70,000 / 1.1 = -$63,636.36

PV = -140,000 / (1 + 0.1)² = -140,000 / 1.1² = -$115,702.48

the present value of the expected income will be positive since it represents cash inflows

PV = 700,000 / (1 + 0.1)³ = 700,000 / 1.1³ = $525,920.36

the net present value of obtaining a law degree = $525,920.36 - $63,636.36 - $115,702.48 = $346,581.52

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

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