A master of accountancy degree at Central University costs $12,000 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 an undergraduate degree. Assume that the average student with an undergraduate degree is expected to earn a salary of $50,00 per year (assumed to be paid at the end of the year for 10 years. Assume that the average student with a master of accountancy degree is expected to earn a salary of $66,000 per year (assumed to be paid at the end of the year) for nine years after graduation. Assume a minimum rate of return of 10%. Round to the nearest dollar.

1. Determine the net present value of cash flows from an undergraduate degree. Use the present value of an annuity table appearing in Exhibit 5 of this chapter.
2. Determine the net present value of cash flows from a master of accountancy degree, assuming that 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?