At the end of a fiscal year, you are 30 years old and expect to work until 60. Your next and next next year’s annual salaries are both 600,000 HKD. You are considering enrolling in a two-year, full-time master’s program starting from the beginning of the next fiscal year. The yearly tuition fee for the master’s program is 300,000 HKD and is due at the beginning of each fiscal year. Your annual salary is expected to increase by 500,000 HKD for ten years after graduation. You cannot work as a student but will get a job immediately after graduation. All salaries are paid out at the beginning of a fiscal year.

(*Ignore any difference in the time value of money between the end of the current fiscal year and the beginning of the next fiscal year.)

a) Draw a cash flow timeline based on the net benefit/cost associated with enrollment

b) If the interest rate is 10%, what is the NPV of enrolling in the master’s program