1. sunk cost?

200,000-loyola education

2.fixed overed cost

20,000-Rent, Clothes, Insurance, Food, etc.

3. project cost?

need help

4.) Erosion?

$50,000-Salary

5.) Opportunity Cost?

10,000-Earrings

6.) Incremental net working capital cost

3,000-Net working Capital

B.) Total cost of the MBA?

need help

C.)present value

need help?

D.)net present value

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E.) Should you pursue MBA?

need help

F.) Should you factor in financing costs?

need help

G.) Shoukd you factor in ongoing fixed overhead costs?

need help

present value of increamental after tax earnings question found answer!

2. You graduated from Loyola two years ago, and you are now earning a salary of $50,000 per year. The total cost of your Loyola education was $200,000. You are now thinking about earning an MBA degree. Because of your excellent education at Loyola, you are eligible for the one-year, accelerated program at Global University, which has a cost of $120,000 for tuition, room, board, books, etc. To earn the MBA, you would have to quit your job and study full-time. As you are deciding what to do, your manager at work tells you that, based on your outstanding performance, you will be promoted in one month; the new position will carry a salary of $60,000 per year, or $10,000 more than you are earning now. You estimate that the MBA will translate into the following incremental after-tax earnings for the next ten years, which is your decision horizon: Year 1 2 3 4 5 6 7 8 9 10 Incremental After-tax Earnings $15,000 20,000 23,000 26,000 30,000 35,000 40,000 50,000 60,000 70,000 You have a discount rate of 10.0%. Lastly, in order to get to/from class, you will need to spend more on transportation, and you will also have to eat several meals a week at fast food restaurants. These incremental net working capital costs will be $3,000 for the year. Your on-going fixed overhead costsfor rent, clothes, insurance, food, etc.-are $20,000 per year. USING THE PRECEDING INFORMATION, PLEASE ANSWER THE FOLLOWING QUESTIONS: A. What is the amount of your 1. Sunk cost? 2. Fixed overhead cost? 3. Project cost? 4. Erosion? 5. Opportunity cost? 6. Incremental net working capital cost? B. Combining all appropriate costs, what is the total cost of the MBA? C. What is the present value of the incremental after-tax earnings? D. What is the net present value of the MBA? E. Should you pursue the MBA? F. Should you factor in financing costs? G. Should you factor in on-going fixed overhead costs? Your 3 Incremental Year After-tax Earnings 1 $15,000 2 20,000 23,000 4 26,000 30,000 6 35,000 7 40,000 8 50,000 9 60,000 10 70,000 Total Present Value 5 Discouted Cash Flow 13,636 16,528 17,279 17,758 18,627 19,757 20,528 23,325 25,446 26,985 199,869 C. What is the present value of the incremental after-tax earnings? 199,869- total present value