Expert Answers /
(Solved): Omar is working at a job that pays $18,000 a year. Omar is now working in a job that pays $18,000 p ...
Omar is working at a job that pays $18,000 a year. Omar is now working in a job that pays $18,000 per year. He is contemplating a one-year automobile mechanics course that costs $1,000 for books and tuition. Omar estimates that the course will increase his income to $23,000 in each of the three years following completion of the course. At the end of those three years, Omar plans to retire to a commune in Boulder, Colorado. The current interest rate is 10 percent. Is it economically rational for Omar to enroll in the course?
Answer:To determine whether it is economically rational for Omar to enroll in the automobile mechanics course, we need to compare the present value of the course's costs and benefits.Let's calculate the present value of the costs and benefits:Cost of the course: The cost of the course is $1,000.2. Benefits of the course: After completing the course, Omar expects an increase in income to $23,000 per year for three years. We need to calculate the present value of this increased income stream.