You give up a full-time salary of $45,000 a year to go to school for 2 years. The total cost of going to school is $30,000. If you want to be able to recover your investment in 5 years or less, what is the minimum salary you would need to earn upon earning your degree? A. $51,000 B. $60,000 C. $69,000 D. $75,000 Please select the best answer from the choices provided A B C D
You will not earn your salary for two consecutive years for the two years in school. To add on your unearned salary, you will have incurred $30,000 to service your school cost in these two years.
Take the forgone salary, $45,000*2, and the school costs, $30,000, as a deduction from your cash account. This means you ate at a negative balance of $90,000 + $30,000. The sum of these two is $120,000.
You intend to earn back the $120,000 in a period not exceeding five years. Per year, your minimum earning should be:
= $120,000 ÷ 5 years
Since you want to earn even your forgone salary, sum it up to $24,000.
= $24,000 + $45,000
Earning your money in 5 years means if you never forgone your full-time salary for 2 years, this would have been 7 years. Furthermore, you would not have paid $30,000 in schooling costs. By the end of 7th year, you would be having:
= ($45,000*7) + $30,000
= $315,000 + $30,000
You want to earn $345,000 in five years. Thus, the least amount you should earn per year is:
= $345,000 ÷ 5 years
If you were to get a job paying you $75,000, you would recover your money in less than five years.
Precisely, this would be 4.6 years ($345,000 ÷ $75,000).
Why You Need to Recover Your Money Soonest
Going to school is an investment. Even though it might not be measured like a real-life business investment project, there is a time within which it should pay back the money you committed to attain academic excellence.