Net present value analysis

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Reference no: EM132892068

(KB) Net Present Value Analysis

In this assignment you will perform a Net Present Value Analysis for a project.

1. Assume a student is planning to pursue a two-year master's degree. There are two educational options the student is considering, with investment and cash flows as follows.

Option A: Full-Time Education Example cash investment: $100,000. Currently the student is earning $30,000. The student will quit his/her current job to study a Master's degree in computer science. Upon graduation the student hopes to earn $60,000 per year in new job.

Option B: Part-Time Education Example cash investment: $100,000. Currently the student is earning $30,000. The student can work part-time for three years at a salary of $20,000 while studying towards the master's degree in project management. Upon graduation the student anticipates a possible increase in salary by $10,000 (total $40,000) in the same company.

The requirements for the assignment are:

Answer the following questions based on the unit readings:

1. Briefly describe what net present value is, how it is calculated, and what it is used for.

2. Calculate the NPV for each educational option. The discount rate is 8%.

3. Which option should the student choose? Explain your decision including any necessary assumptions made.

Reference no: EM132892068

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