Part 2: Is this Investment in Human Capital Worthwhile? Goober is now working in a...
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Part 2: Is this Investment in Human Capital Worthwhile? Goober is now working in a job that pays $9.000 per year. He is contemplating a one-year automobile mechanics course that costs $1,000 for books and tuition, payable right now. He will be unable to work while he takes the course. Goober estimates that the course will increase his income by $5,000 in each of the three years after he completes the course. After three years he is expecting a huge inheritance and will not need to work for the rest of his life. The current interest rate is 5%. Using the human capital investment model, determine whether this investment is worth it to Goober. (Hint: determine the present discounted value of the stream of earnings and compare it to the costs of the education, both direct and indirect.)
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