DB14 – Capital Investment Analysis
For this week’s discussion, consider the following:
A Masters of Accountancy degree at Central University costs $12,000 for an additional fifth year of education beyond the bachelors degree. Assume that all tuition is paid at the beginning of the year. A student considering this investment must evaluate the present value of cash flows from possessing a graduate degree versus holding only an undergraduate degree. Assume that the average student with an undergraduate degree is expected to earn an annual salary of $50,000 per year (assumed to be paid at the end of the year) for 10 years. Assume that the average student with a graduate Masters of Accountancy degree is expected to earn an annual salary of $66,000 per year (assumed to be paid at the end of the year) for 9 years after graduation. Assume a minimum rate of return of 10%.
(1) Determine the net present value of cash flows from an undergraduate degree. Use the present value table provided below.
(2) Determine the net present value of cash flows from a Masters of Accountancy degree, assuming that no salary is earned during the graduate year of schooling.
INITIAL POST: For your initial post discuss the net advantage or disadvantage of pursuing a graduate degree under these assumptions.
Your initial post must be a minimum of 100 words, and it must be your original work. Do not plagiarize. Cite your sources when appropriate. Record your word count at the bottom of your initial post. You will not be able to see your classmate’s posts until you have submitted your initial post.
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