Question
Find the cost of a bachelor's degree at the university of your choice; assume additional costs of $16,000 for an additional fifth year of education
Find the cost of a bachelor's degree at the university of your choice; assume additional costs of $16,000 for an additional fifth year of education to get a master's 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 an annual salary of $55,000 per year (assumed to be paid at the end of the year) for 10 years. Assume that the average student with a graduate master's degree is expected to earn an annual salary of $76,000 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%.
USE THE FOLLOWING INFORMATION: The base tuition at ASU is $10,710. With added costs such as fees, books, supplies the average tuition at the ASU Tempe campus is $30,993.50 per year.
- Determine the net present value of cash flows from an undergraduate degree. Use the present value table provided in Chapter 26.
- Determine the net present value of cash flows from a master's degree, assuming that no salary is earned during the graduate year of schooling.
- What is the net advantage or disadvantage of pursuing a graduate degree under these assumptions?
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