How did you get the 6.14 in your solution to this: A master of accountancy degree at Central University costs $12,000 for an additional fifth year of education beyond the bachelor’s 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 a salary of $50,00 per year (assumed to be paid at the end of the year for 10 years. Assume that the average student with a master of accountancy degree is expected to earn a salary of $66,000 per year (assumed to be paid at the end of the year) for nine years after graduation. Assume a minimum rate of return of 10%. Round to the nearest dollar. Determine the net present value of cash flows from an undergraduate degree. Use the present value of an annuity table appearing in Exhibit 5 of this chapter. Determine the net present value of cash flows from a master of accountancy degree, assuming that no salary is earned during the graduate year of schooling. What is the net advantage or disadvantage of pursuing a graduate degree under these assumptions? check_circle Expert Answer thumb_up thumb_down Step 1 Answer 1 The net present value of cash flows from an undergraduate degree is computed as: Discounted cash outflows from an undergraduate degree Discounted cash inflows from an undergradu
How did you get the 6.14 in your solution to this:
A master of accountancy degree at Central University costs $12,000 for an additional fifth year of education beyond the bachelor’s 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 a salary of $50,00 per year (assumed to be paid at the end of the year for 10 years. Assume that the average student with a master of accountancy degree is expected to earn a salary of $66,000 per year (assumed to be paid at the end of the year) for nine years after graduation. Assume a minimum rate of return of 10%. Round to the nearest dollar.
- Determine the
net present value of cash flows from an undergraduate degree. Use the present value of an annuity table appearing in Exhibit 5 of this chapter. - Determine the net present value of cash flows from a master of accountancy degree, assuming that no salary is earned during the graduate year of schooling.
- What is the net advantage or disadvantage of pursuing a graduate degree under these assumptions?
Expert Answer
Answer 1
The net present value of cash flows from an undergraduate degree is computed as:
Discounted
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