Discounted (present value) calculation I had a homework problem regarding calculating a discounted present value. My solution is:

15000 * (1+.08)^1 + 15000 * (1+.08)^2 = $33 696


The question is this:


  Laura has an undergraduate degree in economics and has been working as
  a utility rate analyst at the local electricity utility. If she
  continues on her present career path, the present value of her
  lifetime earnings is \$250,000. If she takes two years off and gets an
  MA degree in economics, the present value of her lifetime earnings is
  \$275,000. The annual cost of an MA degree in economics is \$15,000
  and the interest rate is 8%. Assume that school fees are paid at the
  beginning of the year.
  
  a.) Calculate the discounted (present value) cost of Laura's graduate
  degree in economics. (2 points)


The given solution is this:

Answer: $28, 889


I don't understand the logic of this question. To me, it seems the present value cost would be the cost of what I would pay if I was accounting for the interest of the tuition.
The calculation that you gave doesn't make sense. To answer this question, you should revise your definition of "present value." The definition you gave isn't specific enough to be operational:


  To me, it seems the present value cost would be the cost of what I would pay if I was accounting for the interest of the tuition.


What does present value mean? Think about it like this. How much money do you need today to pay the future costs. Well you need $\$15,000$ to to pay for the first year and $\$ X$ to pay for the second year. Why did I write $X$? Because we want to know how much money we need today to pay for the second year and that amount is less than $\$15,000$. This is because we can invest $X$ amount of dollars at $8\%$ interest so that we have $\$15,000$ in a year. So, we want to
solve
$$
X * 1.08 = 15000.
$$
Thus, the proper present value calculation is
$$
28,889 \approx 15,000 + \frac{15,000}{1.08}.
$$