Assume today is June 1, 2019. Rosemarie Dela Cruz is 30 years old and has a Bachelor of Science degreein computer science. She is currently employed as a Tier 2 field service representative for a telephonycorporation located in Seattle, Washington, and earns $38,000 a year that she anticipates will grow at3% per year.

Rosemarie hopes to retire at age 65 and has just begun to think about the future. Rosemarie has$75,000 that she recently inherited from her aunt. She invested this money in 10-year Treasury Bonds.She is considering whether she should further her education and would use her inheritance to pay for it. She has investigated a couple of options and is asking for your help as a financial planning intern todetermine the financialconsequences associated with each option. Rosemarie has already beenaccepted to both of these programs, and could start either one soon.

One alternative that Rosemarie is considering is attaining a certification in network design. Thiscertification would automatically promote her to a Tier 3 field service representative in her company.The base salary for a Tier 3 representative is $10,000 more than what she currently earns and sheanticipates that this salary differential will grow at a rate of 3% a year as long as she keeps working. Thecertification program requires the completion of 20 Web-based courses and a score of 80% or better onan exam at the end of the course work. She has learned that the average amount of time necessary tofinish the program is one year. The total cost of the program is $5000, due when she enrolls in theprogram. Because she will do all the work for the certification on her own time, Rosemarie does notexpect to lose any income during the certification.Another option is going back to school for an MBA degree. With an MBA degree, Rosemarie expects tobe promoted to a managerial position in her current firm. The managerial position pays $20,000 a yearmore than her current position. She expects that this salary differential will also grow at a rate of 3% peryear for as long as she keeps working. The evening program, which will take three years to complete,costs $25,000 per year, due at the beginning of each of her three years in school. Because she willattend classes in the evening, Rosemarie doesn't expect to lose any income while she is earning herMBA if she chooses to undertake the MBA.

1. Determine the interest rate she is currently earning on her inheritance by going to Yahoo!Finance (https://finance.yahoo.com) and clicking on the 10-year bond link in the marketsummary. Then go to "Historical Prices" and enter the appropriate date, June 1, 2019, to obtainthe closing yield or interest rate that she is earning. Use this interest rate as the discount ratefor the remainder of this problem.

2. Create a timeline in Excel for her current situation, as well as the certification program and MBAdegree options, using the followingassumptions:

Salaries for the year are paid only once, at the end of the year.The salary increase becomes effective immediately upon graduating from the MBA

program or being certified. That is, because the increases become effective immediatelybut salaries are paid at the end of the year, the first salary increase will be paid exactlyone year after graduation or certification.

3. Calculate the present value of the salary differential for completing the certification program.Subtract the cost of the program to get the NPV of undertaking the certification program.

4. Calculate the present value of the salary differential for completing the MBA degree. Calculatethe present value of the cost of the MBAprogram. Based on your calculations, determine theNPV of undertaking the MBA.

5. Based on your answers to Questions 3 and 4, what advice would you give to Rosemarie? What ifthe two programs are mutually exclusive? That is, if Rosemarie undertakes one of the programsthere is no further benefit to undertaking the other program. Would your advice be different?