Finance

Text THAT SHOULD ALSO BE ONE OF THE SOURCES FOR PAPER is:

Byrd, J., Hickman, K., & McPherson, M. (2013).  Managerial Finance  [Electronic version]. Retrieved from https://content.ashford.edu/

Additional information given from instructor is as follows:

Assignment Instructions:

If your educational costs are waived, you will still need compute the fully cost for your MBA, and the incremental cash inflow for the following Pre-MBA salary – Post MBA salary and use the capital budgeting techniques to solve for NPV,IRR and Payback Period.

Here is an example –

College education direct cost is $40,000, (Solving for NPV) - My present salary is $50,000 without the degree; my new salary will grow to $70,000 with the degree– my incremental revenue ($70k - $50k = $20K- include all raises) NPV = Initial investment or cost is -$40,000, revenues should be factor in its after-tax value (1-tax rate) [ $50,000 x 1-.25 = $37,500 - $52,500 – incremental cash inflow $15,000 after-taxes (70,000 x 1 - .25= $52,500)]; Time period five years, discount rate or opportunity cost 6% = NPV

-$40,000 (15,000/1.06^1 + 15,000/1.06^2, +15,000/1.06^3 +, 15,000/1.06^4+, 15,000/1.06^5 or $15, 000 x 4.212= $63,180 - $40,000 = $23,180 NPV positive. IRR $40,000 / $15,000 = 2.6667 (Present value of annuity table IRR 25%-26%; Payback period cost / cash flow $40,000 / $15,000 = 2.6667 or 2.67 years. (You can use online IRR, NPV, or Excel )