Human Capital Theory

Question 1 a)
Lenny is a worker at the local nuclear power plant who is considering getting another post-secondary diploma. Specifically, Lenny wants to get a 1-year diploma in Engineering Technology to fast-track a promotion at work. Currently, Lenny makes $ 50,000 a year but if he acquires an Engineering Technology diploma he will make $ 53,000 immediately after graduating. However, if he decides to go to college he will have to enroll as a full-time student and will lose his income for one-year. Tuition for the diploma is $ 6,500 (this is the only direct cost Lenny will pay). The current interest rate is 10.9 % . Is it worth it for Lenny to pursue this degree when calculating his internal rate of return?
Question 1 b)
The provincial government has announced that they will fully subsidize the tuition of anyone pursuing a college diploma in a STEM subject. For Lenny, this means that the tuition he pays will drop to zero (D = 0). If he still must sacrifice his full-time income, should Lenny pursue the diploma?
Question 1 c)
Lenny’s employer has decided that instead of forcing him to forgo his income, they will continue to pay him at a part-time rate. This means that Lenny’s annual income will drop from $ 50,000 to $ 35,000. Assuming that he must pay the full cost of tuition (i.e. there is no more subsidized tuition), should Lenny pursue the diploma?