Problem
Jennie lives for three periods. She just completed the first period of her life. Jennie is trying to decide on her future career path. She will either become a nurse or a brain surgeon.
I. If she becomes a nurse, she will earn $50,000 at the end of period 2 and $100,000 at the end of period 3.
II. If she becomes a brain surgeon, she will pay $100,000 now to attend school in period 2 and she will earn $300,000 at the end of period 3.
III. Jennie's discount rate is 4%.
1) What is the net present discounted value (PDV) of becoming a nurse?
2) What is the net PDV of becoming a brain surgeon?
3) Which career path should Jennie choose if she wants to maximize her net PDV?