Books Cost-Benefit analysis question.

-King- · 01-30-2011, 10:19 PM

I have a feeling that this question should be easy, but I can't get it. I'm thinking that the benefits is supposed to outweigh the cost, but I keep getting the opposite. Any help?

Captain Obvious · 01-30-2011, 10:22 PM

I'm not doing the math, but if the costs outweigh the benefits then you shouldn't join the Peace Corps.

milkman · 01-30-2011, 10:26 PM

What the hell are the benefits?

-King- · 01-30-2011, 10:28 PM

Quote:

Originally Posted by milkman

What the hell are the benefits?

Right now, all I have for benefits are 45k satisfaction and 50k for learning french.

The costs are 105k for the salary/room and board, 8k for the physical and transportation, and 3k for experience.

jbwm89 · 01-30-2011, 10:42 PM

what school do you go to?

-King- · 01-30-2011, 10:44 PM

Quote:

Originally Posted by jbwm89

what school do you go to?

Mizzou.

jbwm89 · 01-30-2011, 10:46 PM

Quote:

Originally Posted by -King-

Mizzou.

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

-King- · 01-30-2011, 10:49 PM

Quote:

Originally Posted by jbwm89

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

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

jbwm89 · 01-30-2011, 10:51 PM

Quote:

Originally Posted by -King-

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

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

HonestChieffan · 01-30-2011, 10:49 PM

Lots of Rape in Peace Corps

jbwm89 · 01-30-2011, 10:49 PM

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

-King- · 01-30-2011, 10:51 PM

Quote:

Originally Posted by jbwm89

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

Since you're already taking the 30k peace corp pay out of the cost, why would you need to list it as a benefit?

jbwm89 · 01-30-2011, 10:50 PM

and the 45k for satisfaction i forgot.

jbwm89 · 01-30-2011, 10:51 PM

when you take Macro take the agecon class with Duave instead of the regular econ.

**alnorth** · 01-30-2011, 10:55 PM

Cool problem. I'll restate the conditions first.

#1 Peace corps 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 corps 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 corps, 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 corps, 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 corps 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 corps, you will be working for 49,000 per year.
#7 You will retire 30 years after you are done with the peace corps, 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 corps, you will gain $50,000 of present value.

Join peace corps
Year 1: 10k - 8k + 15k + 50k = 67k
Years 2 and 3: 10k + 15k = 25k
Years 4 through 33: 49k - 15k = 34k
Total: 1.137MM

Don't join peace corps
Years 1 through 33: 50k - 15k = 35k
Total: 1.155MM

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 corps, there could be some interest rate that makes them equal)

Even though you might think the answer "should be" join the peace corps, 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 6, if that merely meant your present value is reduced by 3000, then you should join the peace corps.

01-30-2011, 10:19 PM	Topic Starter
-King- ▓▓▒▒▒▒▒▒▒▒▒▒▒▒▓▓ Join Date: Jan 2009 Casino cash: $-1204257	Cost-Benefit analysis question. I have a feeling that this question should be easy, but I can't get it. I'm thinking that the benefits is supposed to outweigh the cost, but I keep getting the opposite. Any help?
Posts: 65,457

01-30-2011, 10:22 PM	#2
Captain Obvious The Planet's Only Superhero Join Date: Sep 2002 Location: MO Casino cash: $8586472	I'm not doing the math, but if the costs outweigh the benefits then you shouldn't join the Peace Corps. Last edited by Captain Obvious; 01-30-2011 at 10:22 PM.. Reason: whoops...
Posts: 2,833

01-30-2011, 10:26 PM	#3
milkman Dumbass! Join Date: Aug 2000 Location: Leading the Marty bashing Casino cash: $10029395	What the hell are the benefits? __________________
Posts: 70,769

01-30-2011, 10:42 PM	#5
jbwm89 MIZZOU Join Date: Jan 2009 Location: Saint Joseph Casino cash: $10005040	what school do you go to? __________________ "You can't sit on a lead and run a few plays into the line and just kill the clock. You've got to throw the ball over the goddamn plate and give the other man his chance. That's why baseball is the greatest game of them all."
Posts: 1,076

01-30-2011, 10:49 PM	#10
HonestChieffan Seeking the Truth daily Join Date: Jan 2006 Location: In the Country in MO Casino cash: $-1375691	Lots of Rape in Peace Corps __________________ "We read books for knowledge; We read the Bible for wisdom!"
Posts: 54,740

01-30-2011, 10:50 PM	#13
jbwm89 MIZZOU Join Date: Jan 2009 Location: Saint Joseph Casino cash: $10005040	and the 45k for satisfaction i forgot. __________________ "You can't sit on a lead and run a few plays into the line and just kill the clock. You've got to throw the ball over the goddamn plate and give the other man his chance. That's why baseball is the greatest game of them all."
Posts: 1,076

01-30-2011, 10:51 PM	#14
jbwm89 MIZZOU Join Date: Jan 2009 Location: Saint Joseph Casino cash: $10005040	when you take Macro take the agecon class with Duave instead of the regular econ. __________________ "You can't sit on a lead and run a few plays into the line and just kill the clock. You've got to throw the ball over the goddamn plate and give the other man his chance. That's why baseball is the greatest game of them all."
Posts: 1,076

01-30-2011, 10:55 PM	#15
alnorth . Join Date: Dec 2002 Casino cash: $57156239	Cool problem. I'll restate the conditions first. #1 Peace corps 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 corps 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 corps, 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 corps, 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 corps 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 corps, you will be working for 49,000 per year. #7 You will retire 30 years after you are done with the peace corps, 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 corps, you will gain $50,000 of present value. Join peace corps Year 1: 10k - 8k + 15k + 50k = 67k Years 2 and 3: 10k + 15k = 25k Years 4 through 33: 49k - 15k = 34k Total: 1.137MM Don't join peace corps Years 1 through 33: 50k - 15k = 35k Total: 1.155MM 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 corps, there could be some interest rate that makes them equal) Even though you might think the answer "should be" join the peace corps, 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 6, if that merely meant your present value is reduced by 3000, then you should join the peace corps. __________________ how many emo kids does it take to change a lightbulb? HOW MANY?! none they just sit in the dark and cry Last edited by alnorth; 01-30-2011 at 11:04 PM..
Posts: 36,130

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