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Education Investment Analysis

A Masters of Accountancy degree at CU cost $10,000 for an additional fifth year of education beyond the bachelors degree. Assume that all tuition is paid at the beginning of the year. A student considering this investment must evaluate the present value of cash flows from possessing a graduate degree versus holding only the undergraduate degree. Assume that the average student with an undergraduate degree is expected to earn an annual salary of $48,000 per year (assumed to be paid at the end of the year) for 10 years. Assume that the average student with a graduate Masters of Accountancy degree is expected to earn an annual salary of $63,000 per year(assumed to be paid at the end of the year) for 9 years after graduation. Assume a minimum rate of return of 10%.

1. Determine the net present value of cash flows from an undergraduate degree. (using EX2)
2. Determine the net present value of cash flows from a Masters 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 under these assumptions?

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Hi,

Answer: Given that,
Cost of masters of Accountancy degree $10,000
Expected annual salary with an undergraduate degree per year $48,000
Years of earning with an undergraduate 10 years
Expected annual salary ...

Solution Summary

Education investment analysis are examined. The net present value of cash flows from an undergraduate degrees.

$2.19