Before entering graduate school, a student estimated the value of earning an MBA at $300,000. Based on that analysis, the student decided to go back to school. After completing the first year, the student ran the NPV calculations again. How would you expect the NPV to look after the student has completed one year of the program? Specifically, what portion of the analysis must be different than it was the year before?
Being a question based on finance, we need to go back to the basics of the "time value of money." In finance, always note that "a dollar today is always worth more than a dollar tomorrow", and that "cash is king".
The grad student had done an analysis to determine the total cost required to fulfill the MBA course. Based on current valuations (NPV) at the time, a figure was derived at and the student began on the program. A year into the program, running a second analysis of calculations will most definitely give a different outcome on the NPV. The reason for the disparity ...
The NPV after a student enters graduate school is determined.