A Masters of Accountancy degree at Mid-State University would cost $15,000 for an addi-tional fifth year of
Question:
A Masters of Accountancy degree at Mid-State University would cost $15,000 for an addi-tional fifth year of education beyond the bachelor’s degree. Assume that all tuition is paidat the beginning of the year. A student considering this investment must evaluate thepresent value of cash flows from possessing a graduate degree versus holding only theundergraduate degree. Assume that the average student with an undergraduate degree isexpected to earn an annual salary of $45,000 per year (assumed to be paid at the end of theyear) for 10 years. Assume that the average student with a graduate Masters of Accoun-tancy degree is expected to earn an annual salary of $57,000 per year (assumed to be paidat the end of the year) for nine years after graduation. Assume a minimum rate of returnof 10%.1.Determine the net present value of cash flows from an undergraduate degree. Use thepresent value tables provided in this chapter.2.Determine the net present value of cash flows from a Masters of Accountancy degree,assuming no salary is earned during the graduate year of schooling.3.What is the net advantage or disadvantage of pursuing a graduate degree un-der these assumptions
Expert Answer:
Answer 1 Determining the Net present value of cash flows from an Undergraduate degree Year 0 1 to 10 ... View the full answer
