What cost does this return calculation fail to account

Assignment Help Financial Management
Reference no: EM131583481

Without a business degree, you currently earn $35,000 per year. With a business degree you can earn $50,000 per year. Tuition for 4 years at the University of Utah is approximately $30,000.

(a) (Extra credit) What is the rate of return on your investment? You can assume tuition is a one-time payment today, that you receive your first salary at the end of the first year, and that you will work for 40 years.

(b) (Extra credit) Is this most likely a real return or a nominal return? Why? Think about the real application to this problem.

(c) (Extra credit) Assuming these numbers are correct, what cost does this return calculation fail to account for that could significantly change the calculated return? Calculate the rate of return on the investment considering the significant cost that the calculation fails to account for using your own assumptions (and the TVM concepts we've learned so far).

Reference no: EM131583481

Questions Cloud

Calculate the yield using a geometric average : Interest rates on 4-year Treasury securities are currently 6.3%, while 6-year Treasury securities yield 8%. Calculate the yield using a geometric average.
Banking business has declined in both size and profitability : Traditional banking business has declined in both size and profitability. Four major financial innovations take the blame.
What is its default risk premium : Assume that there is no maturity risk premium. What is its default risk premium?
What is the yield on seven-year treasury note : The real risk-free rate is 2.95%. Inflation is expected to be 2.55% this year, What is the yield on a 7-year Treasury note?
What cost does this return calculation fail to account : what cost does this return calculation fail to account for that could significantly change the calculated return?
What is the default risk premium on the corporate bonds : If the liquidity premium is 0.6%, what is the default risk premium on the corporate bonds?
Considering two mutually exclusive-required projects : Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below.
What is yield on three-year treasury securities : Expected Interest Rate The real risk-free rate is 3%. What is the yield on 3-year Treasury securities?
Real risk-free rate : You read in The Wall Street Journal that 30-day T-bills are currently yielding 4.9%. Your brother-in-law, a broker at Safe and Sound Securities,

Reviews

Write a Review

Financial Management Questions & Answers

  What are three advantages of using a credit card

What information will you need to supply when applying for credit? What kinds of attributes are creditors looking for? Do you need to have all these attributes to get credit?

  What is the dividend amount according to the policy

The recent financial reports indicate that the company has $5.50 of EPS. What is the dividend amount according to the policy?

  Which will require additional financing

Adams Manufacturing Inc. buys $9 million of materials (net of discounts) on terms of 2/10, net 50; and it currently pays after 10 days and takes the discounts. Adams plans to expand, which will require additional financing. If Adams decides to forgo ..

  What will be the effect on bond prices and interest rates

What will be the effect on bond prices and interest rates?- Who is likely to have gained the most: investors who bought long-term bonds in 2010 or investors who sold them? Briefly explain.

  Choice of two investment accounts

You have your choice of two investment accounts. Investment A is a 14-year annuity that features end-of-month $1,850 payments and has an interest rate of 8.2 percent compounded monthly. How much money would you need to invest in B today for it to be ..

  Determine the dpbp of this investment

An investment of $1,011,000 today yields positive cash flows of $200,000 each year for years 1 through 10. MARR is 12%. Determine the DPBP of this investment

  Difference in increased assets-seasonal asset requirements

Assuming increasing sales growth, what is the difference between a permanent need for increased assets and seasonal asset requirements? Explain the costs and benefits of the following policies: Restrictive, Compromise and Flexible financing policies...

  Explain the difference between two balance sheet dates

Which of the required financial statements explain the difference between two balance sheet dates?

  World bank and the world trade organisation

What are the roles of the IMF, the World Bank and the World Trade Organisation? How have their roles changed?

  Tradeoffs between active and passive portfolio management.

Discuss the tradeoffs between active and passive portfolio management.  Explain how a portfolio manager adds value relative to a benchmark. Discuss in some detail the steps for determining an asset swap spread.

  Thereby incurring foreign exchange risk

North Bank has been borrowing in the U.S. markets and lending abroad, thereby incurring foreign exchange risk.

  Determine using the capitalized cost approach

Four different alternative designs as shown in table below are available for a public interest project. Determine using the capitalized cost approach which alternative is the most desirable one. MARR =5% Alternative X Alternative Y Alternative Z Do n..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd