Considering Your Costs and Benefits
School costs money. Is this an expenditure that you should have avoided? A year of tuition at a public four-year college costs about $8,655, and a year of tuition at a public two-year college costs about $1,359. If you did not go to college, you might avoid mountains of school-related debt. In fact, each year, about 600.000 students decide to drop out of school. Many of them never return. Suppose that you are working two jobs and going to college, and that you are not making ends meet. Your grades are suffering due to your lack of available study time. You feel depressed. Should you drop out of school?
YES: You can always go back to school. If your grades are bad and you are depressed, what good is school doing you anyway?
NO: Once you drop out, it is very hard to get enough momentum to go back. Dropping out will dramatically reduce your long-term opportunities. It is better to stay in school, even if you take only one class per semester. While you cannot go back and redo your initial decision, you can look at some facts to evaluate the wisdom of your decision.
Instructions
Write a response indicating your position regarding this situation. Provide support for your view.
Want to see the full answer?
Check out a sample textbook solutionChapter 7 Solutions
Managerial Accounting: Tools for Business Decision Making
- Lauren was accepted at three different graduate schools, and she must choose one. Elite U costs $65,000 per year and did not offer Lauren any financial aid. Lauren values attending Elite U at $80,000 per year. State College costs $32,000 per year and offered Lauren an annual $10,000 scholarship. Lauren values attending State College at $45,000 per year. NoName U costs $20,000 per year and offered Lauren a full $20,000 annual scholarship. Lauren values attending NoName at $15,000 per year.arrow_forwardVanessa Lazo was an amazing high school student and so it was no great surprise when she was accepted into Berkeley College. To entice Vanessa to attend Berkeley, the college offered her a reduced tuition of $13,000 per year (full-time tuition would typically be $43,000 per year). Berkeley also has a scholarship program thanks to a donation from William Gatos. Vanessa was the Gatos Scholarship winner and will receive a scholarship for $20,000. Vanessa will use the scholarship first to pay the $13,000 tuition and the remainder to cover room and board at Berkeley. Lastly, Berkeley also offered Vanessa a part-time job on campus as a lab assistant in the tech department for which she is paid $1500. Required: Go to the IRS website (www.irs.gov) and locate Publication 970. Review the section on Scholarships. Please let us know how much of the package is taxable.arrow_forward“Suppose that your parents are willing to lend you $20,000 for part of the cost of your college education and living expenses. They want you to repay them the $20,000 without any interest, in a lump sum 15 years after you graduate, when they plan to retire and move. Meanwhile, you will be busy repaying federally guaranteed loans for the first 10 years after graduation. But you realize that you won’t be able to repay the lump sum without saving up. So you decide that you will put aside money in an interest-bearing account every month for the first five years before the payment is due. You feel comfortable with setting aside $275 a month (the amount of the payment on your college loans, which will be paid off after 10 years).     How high an annual nominal rate on savings do you need to accumulate the $20,000, in 60 months, if interest is compounded monthly? Enter into a spreadsheet the values of d = 275, r = 0.05 (annual rate), and n = 60, and the savings formula with r replaced…arrow_forward
- A college student is reported in the newspaper as having won $10,000,000 in the Kansas State Lottery. However, as is often the custom with lotteries, she does not actually receive the entire $10 million now. Instead she will receive $500,000 at the end of the year for each of the next 20 years. If the annual interest rate is 6%, what is the present value (today’s amount) that she won? (Ignore taxes.)arrow_forward(spread sheet) supposed that your parents are willing to lend you $20,000 for part of the cost of your college education and living expenses. They want you to repay them the $20,000, without any interest, in a lump sum 15 years after you graduate, when they plan to retire and move. Meanwhile, you will be busy repaying federally guaranteed loans for the first 10 years after graduation. But you realize that you won't be able to repay the lump sum without saving up. So you decide that you will put aside money in an interest-bearing account every month for the five years before the payment is due. You feel comfortable with putting aside $275 a month ( the amount of the payment of your college loans, which will be paid off after 10 years.) how high an annual nominal interest rate in savings do you need to accumulate the $20,000 in 60 months, if interest is compounded monthly? Enter into a spreadsheet the values d =275, r=0.05 (annual rate), and n=60, and the savings formula with r…arrow_forwardBusiness and engineering seniors are comparing methods of financing their college education during their senior year. The business student has $30,000 in student loans that comes due at graduation. Interest is an effective 4% per year. The engineering senior owes $50,000: 50% from his parents with no interest due, and 50% from a credit union loan. This latter amount is also due at graduation with an effective rate of 7% per year. (a) What is the D-E mix for each student? (b) If their grandparents pay the loans in full at graduation, what are the amounts on the checks they write for each graduate? (c) When grandparents pay the full amount at graduation, what percent of the principal does the interest represent?arrow_forward
- Suppose that your parents are willing to lend you $20,000 for part of the cost of your college education and living expenses. They want you to repay them the $20,000, without any interest, in a lump sum 15 years after you graduate, when they plan to retire and move. Meanwhile, you will be busy repaying federally guaranteed loans for the first 10 years after graduation. But you realize that you won’t be able to repay the lump sum without saving up. So you decide that you will put aside money in an interest-bearing account every month for the five years before the payment is due. You feel comfortable with putting aside $275 a month (the amount of the payment on your college loans, which will be paid off after 10 years). How high an annual nominal interest rate on savings do you need to accumulate the $20,000 in 60 months, if interest is compounded monthly? Enter into a spreadsheet the values d 5 275, r 5 0.05 (annual rate), and n 5 60, and the savings formula with r replaced by r/12 (the…arrow_forwardMore than 40 million Americans are estimated to have at least one outstanding student loan to help pay college expenses (40 Million Americans Now Have Student Loan Debt, CNNMoney, September 2014). Not all of these graduates pay back their debt in satisfactory fashion. Suppose that the following joint probability table shows the probabilities of student loan status and whether or not the student had received a college degree. a. What is the probability that a student with a student loan had received a college degree? b. What is the probability that a student with a student loan had not received a college degree? c. Given that the student has received a college degree, what is the probability that the student has a delinquent loan? d. Given that the student has not received a college degree, what is the probability that the student has a delinquent loan? e. What is the impact of dropping out of college without a degree for students who have a student loan?arrow_forwardMichiko and Saul are planning to attend the same university next year. The university estimates tuition, books, fees, and living costs to be 12,000 per year. Michikos father has agreed to give her the 12,000 she needs to attend the university. Saul has obtained a job at the university that will pay him 14,000 per year. After discussing their respective arrangements, Michiko figures that Saul will be better off than she will. What, if anything, is wrong with Michikos thinking?arrow_forward
- Carlos opens a dry cleaning store during the year. He invests 30,000 of his own money and borrows 60,000 from a local bank. He uses 40,000 of the loan to buy a building and the remaining 20,000 for equipment. During the first year, the store has a loss of 24,000. How much of the loss can Carlos deduct if the loan from the bank is nonrecourse? How much does Carlos have at risk at the end of the first year?arrow_forwardA high school graduate has to decide between working and going to college. If he works, he will work for the next 50 years of his life. If he goes to college, he will be in college for 5 years, and then work for 45 years. In this model, the rate of discount that equates the lifetime present value of not going to college and going to college is 8.24 percent when the cost of each year of college is $15,000, each year of noncollege work pays $35,000, and each year of postcollege work pays $60,000. For each of the parts below, discuss how the rate of discount that equalizes the two options would change and who would make a different schooling decision based on the change. (Extra credit: Use Excel to show that the rate of return to schooling is 8.24 percent in the above case and solve for the rates of discount associated with each of the parts below.) a. Each year of college still costs $15,000 and each year of postcollege work still pays $60,000, but each year of noncollege work now pays…arrow_forwardYour parents have accumulated a $120,000 nest egg. They have been planning to use this money to pay college costs to be incurred by you and your sister, Courtney. However, Courtney has decided to forgo college and start a nail salon. Your parents are giving Courtney $15,000 to help her get started, and they have decided to take year-end vacations costing $10,000 per year for the next four years. How much money will your parents have at the end of four years to help you with graduate school? You plan to work on a master’s and perhaps a PhD. If graduate school costs $26,353 per year, approximately how long will you be able to stay in school based on these funds? Use 9 percent as the appropriate interest rate throughout this problem. Round all values to whole numbers     Flag question: Question 6 Question 64.5 pts What are the funds available after the Nail Salon? Group of answer choices $100,000 $105,000 $72,000 $98,500    Flag question: Question 7 Question 74.5…arrow_forward
- Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning