Question

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

Answer 1

Opportunity cost = 2 × $45,000 = $90,000. Total investment = $90,000 + $30,000 = $120,000.
Needed annual extra to recover in 5 years = $120,000 / 5 = $24,000.
Minimum post-degree salary = $45,000 + $24,000 = $69,000.

Answer: c. $69,000