Theodore is considering a one-year training program to learn how to install airport screening equipment at Southern Alberta Institute of Technology (SAIT). SAIT charges $20,000 in tuition for the one-year program. If Theodore takes the program, he will also forego his current annual salary of $100,000. However, his employer has promised him a five-year contract earning $130,000 annually. Theodore plans to retire in six years.
Use the above information to answer the questions below
a) Should Theodore enroll in the program? Why? Assume Theodore's annual 'discount rate' is five per cent (5.0%).
b) Does the answer in a) depend on Theodore's discount rate? Why or why not?