Your 18 year old friend is considering what to do with their working life until they...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Your 18 year old friend is considering what to do with their working life until they retire at age 65. They've sought your advice. For simplicity, ignore taxes and assume that wages will be paid annually in arrears and will be constant (zero growth). The abbreviation 'k' (Greek kilo) means thousands, so 1k is 1000. Let the present be time zero (te0) and the year of retirement is time 47 (t=47). Your friend is deciding between: Studying a human resources (HR) bachelor degree at university for 3 years, costing $10k at the start of each year (3 cash outflows at t=0, 1 & 2), then beginning work as a HR professional for $70k pa (44 annual payments from t-4 to 47 inclusive); . Working as a HR Junior administrator for $40k pa for 5 years (5 annual payments from t=1 to t=5), then doing a masters course in HR for 2 years costing $10k at the start of each year (2 cash outflows at t=5 and 6), then work as a HR professional for $70k over the next 40 years until retirement (40 annual payments from t=8 to 47 inclusive); . You estimate that the required return is 5% pa with either career, and that they're equally risky and enjoyable. The cash flows are shown in the table. Which of the following statements is NOT correct? Comparing the two alternatives, completing a bachelor degree now compared to a masters degree later: (a) First 5 years incremental cash flows starting from time zero are -10k, -50k, -50k, -40k, 30k,... (b) Payback period is 6 years. (c) NPV is $18.366k. (d) IRR is more than the required return. (e) This project has regular incremental cash flows so there will be just one IRR. Career Choices and Cash Flows Work, then Bachelor Time degree then work 0 1 2 3 4 5 6 7 8 9 *** 47 -10 -10 FORRRRRR IR -10 70 70 70 70 70 70 70 masters degree, then work again 0 3990820088 18 40 40 40 40 -10 70 70 70 Your 18 year old friend is considering what to do with their working life until they retire at age 65. They've sought your advice. For simplicity, ignore taxes and assume that wages will be paid annually in arrears and will be constant (zero growth). The abbreviation 'k' (Greek kilo) means thousands, so 1k is 1000. Let the present be time zero (te0) and the year of retirement is time 47 (t=47). Your friend is deciding between: Studying a human resources (HR) bachelor degree at university for 3 years, costing $10k at the start of each year (3 cash outflows at t=0, 1 & 2), then beginning work as a HR professional for $70k pa (44 annual payments from t-4 to 47 inclusive); . Working as a HR Junior administrator for $40k pa for 5 years (5 annual payments from t=1 to t=5), then doing a masters course in HR for 2 years costing $10k at the start of each year (2 cash outflows at t=5 and 6), then work as a HR professional for $70k over the next 40 years until retirement (40 annual payments from t=8 to 47 inclusive); . You estimate that the required return is 5% pa with either career, and that they're equally risky and enjoyable. The cash flows are shown in the table. Which of the following statements is NOT correct? Comparing the two alternatives, completing a bachelor degree now compared to a masters degree later: (a) First 5 years incremental cash flows starting from time zero are -10k, -50k, -50k, -40k, 30k,... (b) Payback period is 6 years. (c) NPV is $18.366k. (d) IRR is more than the required return. (e) This project has regular incremental cash flows so there will be just one IRR. Career Choices and Cash Flows Work, then Bachelor Time degree then work 0 1 2 3 4 5 6 7 8 9 *** 47 -10 -10 FORRRRRR IR -10 70 70 70 70 70 70 70 masters degree, then work again 0 3990820088 18 40 40 40 40 -10 70 70 70
Expert Answer:
Answer rating: 100% (QA)
The detailed answer for the above question is provided below Statement a is incorrect The first 5 ye... View the full answer
Related Book For
Personal Finance Turning Money into Wealth
ISBN: 978-0134730363
8th edition
Authors: Arthur J. Keown
Posted Date:
Students also viewed these finance questions
-
Suppose that Toyota and GM are considering entering a market for electric cars and that their profits from entering or not entering the market are given in the table below. (a) Does GM have a...
-
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
-
You are an independent financial planner in Sydney, Australia. It is currently April 2020 and you have just concluded a meeting with your client below. Client: Muhammad. Marital Status: Single,...
-
A long, slender bar in the shape of a right circular cone with length L and base diameter d hangs vertically under the action of its own weight (see figure). The weight of the cone is W and the...
-
In what ways is the New York Stock Exchange similar to a perfectly competitive market?
-
On a random day during the year, what is the probability there will be 4 admissions to the emergency ward, assuming there are 345 normal-pollution days and 20 high-pollution days? Environmental...
-
Heated air required for a food-drying process is generated by passing ambient air at \(20^{\circ} \mathrm{C}\) through long, circular tubes \((D=50 \mathrm{~mm}, L=5 \mathrm{~m}\) ) housed in a steam...
-
Due to rapid turnover in the accounting department, a number of transactions involving intangible assets were improperly recorded by Wasp Company in 2010. 1. Wasp developed a new manufacturing...
-
If we list all the natural (integer) numbers below 10 that are multiples of 3 or 5, we get 3, 5, 6 and 9. The sum of these multiples is 23. Write a program in the language of your choice to calculate...
-
1. In what ways, if any, does the discussion in this case apply to managerial accountants rather than to CPAs? Explain your response. 2. In what ways, if any, does the discussion in this case apply...
-
Find the transformed equation of a square root function with vertex shifted 4 units to right and 3 units below the vertex of parent function and is vertically reflected. (no strecth or compression) o...
-
Your LinkedIn summary is a great opportunity to present a clear picture of who you are and what you can bring to a job. Your task: Draft a summary for your LinkedIn profile, making sure to stay...
-
In the process of seeking a job, you receive an email inviting you to an interview. The letter includes the names of the people conducting the interview. How can you make use of this information?
-
How can visually oriented free-form slides help keep an audience engaged in a presentation?
-
Write a brief summary of reasons to avoid the following rsum content: 1. Content copied from websites providing advice 2. Claims about your experience that you cannot substantiate with some form of...
-
How does embracing the backchannel reflect the you attitude?
-
3. Fill in the blank. Class width is found by Choose the correct answer below. A. subtracting a lower class limit from the next consecutive lower class limit B. subtracting the lower limit of one...
-
What does non-recourse financing mean?
-
Upon her grandmothers death, So-hyun received $100,000 to use for college expenses or for starting her family. The money is in a checking account for So-hyun to use as she chooses. How much tax does...
-
Sukeeta, a young mother, is preparing to file her 2017 income tax return. Her husband, who was tragically killed in a boating accident in the summer of 2017, always handled the tax filing. Assuming...
-
You are offered $100,000 today or $300,000 in 13 years. Assuming that you can earn 8 percent on your money, which should you choose?
-
Kinney A.. had the following assets and liabilities on the dates indicated. Kinney began business on January 1, 2024, with an investment of 100,000. Instructions From an analysis of the change in...
-
Two items are omitted from each of the following summaries of statement of financial position and income statement data for two proprietorships for the year 2025, Greenes Goods and Solar Enterprises....
-
Listed below are some items found in the financial statements of Min-Seo Promotions. Indicate in which financial statement(s) the following items would appear. a. Service revenue. b. Equipment. c....
Study smarter with the SolutionInn App