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Determine the net present value of cash flows

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Problem - 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 the undergraduate degree. Assume that the average student with an undergraduate degree is expected to earn a 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 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.

Required -

a. Determine the net present value of cash flows from an undergraduate degree.

b. 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.

c. What is the net advantage or disadvantage of pursuing a graduate degree under these assumptions?

Reference no: EM132717968

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