Originally Posted by milkman (Post 7395083)

What the hell are the benefits?

Originally Posted by jbwm89 (Post 7395134)

what school do you go to?

Originally Posted by -King- (Post 7395138)

Mizzou.

Originally Posted by jbwm89 (Post 7395145)

I took that class but it was 4 years ago. Sharon Ryan?

Originally Posted by jbwm89 (Post 7395154)

Benefits:
Pay: 30,000
Language benefit: 50,000

Costs:
Opp cost of lost job – expenses x 3 years : 105,000
Physical: 8,000
Lifetime pay decrease: 30,000

Originally Posted by -King- (Post 7395155)

No. I could have taken her class, but it was too early in the day. I have Martin Pereyra.

Originally Posted by jbwm89 (Post 7395160)

Pereyra sucks but Ryan is way worse, only C I have ever gotten at mu.

Originally Posted by -King- (Post 7395165)

Yeah, I'm thinking that I'm going to learn more out of the weekly tutoring sessions that at the actual lecture.

Originally Posted by alnorth (Post 7395174)

Cool problem. I'll restate the conditions first.

#1 Peace core stint would last for 3 years
#2 In those 3 years, your food and lodging is paid for, and you would get $10,000 per year.
#3 Alternatively, you can forget the peace core and start working right away. $50,000 per year, minus $15,000 expenses for paying for your own room and board, net $35,000 per year
#4 If you join the peace core, you will receive emotional enjoyment worth the equivalent to you of $15,000 per year in those 3 years.
#5 If you join the peace core, you incur a one-time cost in the first year of $8,000
#6 This condition is worded vaguely. (eg "lifetime pay at 1,000 per year" could mean the present value of your life earnings is reduced by 3,000, or that your starting salary after the peace corp will be 49,000, or that it will be 47,000, or some other interpretation) I decided to assume that after you get back from the peace corp, you will be working for 49,000 per year.
#7 You will retire 30 years after you are done with the peace corp, or 33 years from today. So you'll either be working at your job for 30 years or 33 years.
#8 If you work for the peace core, you will gain $50,000 of present value.

Join peace core
Year 1: 10k - 8k + 15k + 50k = 67k
Years 2 and 3: 10k + 15k = 25k
Years 4 through 33: 49k - 15k = 34k
Total: 1.112MM

Don't join peace core
Years 1 through 33: 50k - 15k = 35k
Total: 1.115MM

It's very close, but I'm also coming up with no. Since we are including non-monetary "emotional" gains, I don't know that it would be appropriate to evaluate what happens when you introduce an interest rate. (otherwise with the numbers this close and that lump sum for joining the peace core, there could be some interest rate that makes them equal)

Even though you might think the answer "should be" join the peace core, I wouldn't be surprised if it was no. This seems like a clever way to fool the student into thinking one answer just has to be right and twisting the numbers around to fit that conclusion instead of just doing the math.

edit: going back to condition 5, if we assume that it meant reduce the lifetime earnings by 3k, then you should join the peace corp.

Originally Posted by alnorth (Post 7395174)

Cool problem. I'll restate the conditions first.

#1 Peace core stint would last for 3 years
#2 In those 3 years, your food and lodging is paid for, and you would get $10,000 per year.
#3 Alternatively, you can forget the peace core and start working right away. $50,000 per year, minus $15,000 expenses for paying for your own room and board, net $35,000 per year
#4 If you join the peace core, you will receive emotional enjoyment worth the equivalent to you of $15,000 per year in those 3 years.
#5 If you join the peace core, you incur a one-time cost in the first year of $8,000
#6 This condition is worded vaguely. (eg "lifetime pay at 1,000 per year" could mean the present value of your life earnings is reduced by 3,000, or that your that your starting salary after the peace corp will be 49,000, or that it will be 47,000, or some other interpretation) I decided to assume that after you get back from the peace corp, you will be working for 49,000 per year.
#7 You will retire 30 years after you are done with the peace corp, or 33 years from today. So you'll either be working at your job for 30 years or 33 years.
#8 If you work for the peace core, you will gain $50,000 of present value.

Join peace core
Year 1: 10k - 8k + 15k + 50k = 67k
Years 2 and 3: 10k + 15k = 25k
Years 4 through 33: 49k - 15k = 34k
Total: 1.112MM

Don't join peace core
Years 1 through 33: 50k - 15k = 35k
Total: 1.115MM

It's very close, but I'm also coming up with no. Since we are including non-monetary "emotional" gains, I don't know that it would be appropriate to evaluate what happens when you introduce an interest rate. (otherwise with the numbers this close and that lump sum for joining the peace core, there could be some interest rate that makes them equal)

Even though you might think the answer "should be" join the peace core, I wouldn't be surprised if it was no. This seems like a clever way to fool the student into thinking one answer just has to be right and twisting the numbers around to fit that conclusion instead of just doing the math.

edit: going back to condition 5, if we assume that it meant reduce the lifetime earnings by 3k, then you should join the peace corp.

Originally Posted by -King- (Post 7395189)

The reason I'm thinking the answer should be yes is because question 2 says: "Now suppose you have finished your peace corps service and you find the following things occurred that you had not expected. Suppose you were correct about all your other expectations"

So I'm thinking that the benefit must have been more than the cost for him to join. Maybe I'm overthinking this.

Originally Posted by alnorth (Post 7395242)

condition 6 is screwing this up. I'm now beginning to think it just meant take off 3000 total instead of 1 grand per year (or 30k total). The reason is the word "lifetime". If the question writer wanted to say your salary is reduced to 49,000, then if that word is removed, the intent is much clearer. "lifetime" does not need to be there if that was the intent.

If the question meant to say you'll lose 3,000 over the course of your life, then the value of joining the peace corps is $1.164MM

edit: yep, after reading it again I change my mind, I'm going with the alternate interpretation, and I'd make it very clear what I was doing and why. So yes, join the peace corps.

Originally Posted by -King- (Post 7395282)

Wait, am I supposed to calculate it for his working career?

Benefits

30,000 peace corp
49,000 per year for 30 years
50,000 french
15,000 per year for 3 years for satisfaction in the peace corps

Total= $1,545,000

Costs
50,000 a year for 30 years
8,000 for the transportation and physical
15000 room and board

Total = $1,523,000

I have never overthunk a problem like this LMAO

Originally Posted by -King- (Post 7395318)

Emailed a TA. She said that the cost SHOULD outweigh the benefit.

Originally Posted by -King- (Post 7395345)

So all in all do I calculate it for her whole career, or calculate it for 3 years?

Originally Posted by alnorth (Post 7395355)

The best way is to evaluate both choices. There is not an easy intuitive way to say cost = x and benefit = y, I'd do peace corps person earned x in his life, and corporate person earned y in his life.

Originally Posted by -King- (Post 7395345)

So all in all do I calculate it for her whole career, or calculate it for 3 years?

Originally Posted by -King- (Post 7395345)

So all in all do I calculate it for her whole career, or calculate it for 3 years?

Originally Posted by -King- (Post 7395345)

So all in all do I calculate it for her whole career, or calculate it for 3 years?

Originally Posted by Rain Man (Post 7395768)

Frankly, I think the best way is not to add up the whole career because it's a pain in the neck. You're just looking at differentials, so you should assume that the corporate drone job is zero and freeze it at that, then calculate the relative costs and benefits of the Peace Corps gig and see if it adds to more than zero or less than zero. That's the way they worded the problem.

Originally Posted by Saul Good (Post 7395822)

This

(50k-15k-15k-10k)*3= 30k salary less expenses less annual enjoyment.
30k+8k-50k= -12k representing 30k from above plus physical less french.
-12k + (1k*30) = 18k net benefit from going corporate (not factoring in the fact that the extra thousand earned per year should be discounted to determine a present value).

Originally Posted by -King- (Post 7395359)

Yeah, I think thats the best route, but it doesn't say when the corporate person retires. For the peace corps person, it's 30 years.

Originally Posted by Rain Man (Post 7395768)

Frankly, I think the best way is not to add up the whole career because it's a pain in the neck. You're just looking at differentials, so you should assume that the corporate drone job is zero and freeze it at that, then calculate the relative costs and benefits of the Peace Corps gig and see if it adds to more than zero or less than zero. That's the way they worded the problem.

Originally Posted by alnorth (Post 7395881)

I disagree, since there is not an interest rate or any discounting that has to be done, the math is trivial. Also, it is more intuitive and easy to understand to say "if you do this, you'll get this much money, and if you do that, you'll get that much money". Its how we usually evaluate economic decisions. Classifying benefits vs costs works too, but its a bit more needlessly esoteric.