Reply to Carnegie Mellon vs UVA where would you go?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Carnegie Mellon has a 40-year projected NPV (Net Present Value -- factors costs and income) of $1.75M.  UVA has a 40-year NPV of $1.29M.

https://cew.georgetown.edu/cew-reports/collegeroi/

If you want a "value added" analysis, Carnegie Mellon has median near term earnings of $72K/yr. vs expected earnings of $63.8K (expected is based on selectivity and the majors selected by graduates), for a value add of $8,200 per year.  UVA has median earnings of $58.6K vs expected of $61K for a value add of negative $2,400 per year.

https://cew.georgetown.edu/cew-reports/college-rankings/[/quote]

Here's another, perhaps superior, way to analyze the question:  Suppose you, as a parent, invest the difference in cost between CMU and UVA on behalf of your child, and hold the funds in trust for 40 years.  In other words, you take $40k/year X 4 = $160K, and grow that amount by an assumed real rate of return of 7% compounded over 40 years (or 10%/year in nominal terms).  Your UVA grad will retire with a nest egg, expressed in current dollars, of $2.4 million (or $7.2 million expressed in 2060 dollars).  These sums might be reduced somewhat it you can't figure out a tax-advantaged way to invest the money over the 40 year period.

And, of course, this analysis assumes your kid never does any retirement savings on his own (but he surely will).

In any event, the value of the invested difference in cost between CMU and UVA over 40 years positively swamps the difference in NPV of lifetime earnings you've cited above.[/quote]
10% annual return on investment is not remotely realistic. 
But if you want to use that theory, if the difference in pay is invested every year, it swamps out the UVA tuition different investment idea within a decade.[/quote]

NPV includes time value of inflows (income) and outflows (costs).  So your example is already covered in the analysis.[/quote]

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