1. 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 Masterss 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%. Determine the net present value of cash flows from an undergraduate degree. Determine the net present value of cash flows from a Masterss 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?

Table A-1 Present Value of $1 Present Value 7% 8% 9% Periods 1% 2% 3% 4% 5% 6% 1 2 0.990 0.980 0.971 0.961 0.951 0.980 0.961 0.942 0.924 0.906 0.971 0.943 0.915 0.888 0.863 0.962 0.925 0.889 0.855 0.822 0.952 0.907 0.864 0.823 0.784 0.943 0.890 0.840 0.792 0.747 0.935 0.873 0.816 0.763 0.713 0.926 0.857 0.794 0.735 0.681 0.917 0.842 0.772 0.708 0.650 4 5 6 7 8 9 10 0.942 0.933 0.923 0.914 0.905 0.888 0.871 0.853 0.837 0.820 0.837 0.813 0.789 0.766 0.744 0.790 0.760 0.731 0.703 0.676 0.746 0.711 0.677 0.645 0.614 0.705 0.665 0.627 0.592 0.558 0.666 0.623 0.582 0.544 0.508 0.630 0.583 0.540 0.500 0.463 0.596 0.547 0.502 0.460 0.422 11 12 13 14 15 0.896 0.887 0.879 0.870 0.861 0.804 0.788 0.773 0.758 0.743 0.722 0.701 0.681 0.661 0.642 0.650 0.625 0.601 0.577 0.555 0.585 0.557 0.530 0.505 0.481 0.527 0.497 0.469 0.442 0.417 0.475 0.444 0.415 0.388 0.362 0.429 0.397 0.368 0.340 0.315 0.388 0.356 0.326 0.299 0.275 16 17 18 19 20 0.853 0.844 0.836 0.828 0.820 0.728 0.714 0.700 0.686 0.673 0.623 0.605 0.587 0.570 0.554 0.534 0.513 0.494 0.475 0.456 0.458 0.436 0.416 0.396 0.377 0.394 0.371 0.350 0.331 0.312 0.339 0.317 0.296 0.277 0.258 0.292 0.270 0.250 0.232 0.215 0.252 0.231 0.212 0.194 0.178 21 22 23 24 0.811 0.803 0.795 0.788 0.780 0.660 0.647 0.634 0.622 0.610 0.538 0.522 0.507 0.492 0.478 0.439 0.422 0.406 0.390 0.375 0.359 0.342 0.326 0.310 0.295 0.294 0.278 0.262 0.247 0.233 0.242 0.226 0.211 0.197 0.184 0.199 0.184 0.170 0.158 0.146 0.164 0.150 0.138 0.126 0.116 25 26 27 28 0.772 0.764 0.757 0.749 0.742 0.598 0.586 0.574 0.563 0.552 0.464 0.450 0.437 0.424 0.412 0.361 0.347 0.333 0.321 0.308 0.281 0.268 0.255 0.243 0.231 0.220 0.207 0.196 0.185 0.174 0.172 0.161 0.150 0.141 0.131 0.135 0.125 0.116 0.107 0.099 0.106 0.098 0.090 0.082 0.075 29 30 40 0.672 0.453 0.307 0.208 0.142 0.097 0.067 0.046 0.032 50 0.608 0.372 0.228 0.141 0.087 0.054 0.034 0.021 0.013 10% 12% 14% 15% 16% 18% 20% 0909 0.826 0.751 0.683 0.621 0.893 0.797 0.12 0.636 0.567 0.87 0.769 0.675 0.52 0.519 0.870 0.756 0.658 0.572 0.47 0.862 0.743 0.641 0.552 0.476 0.847 0718 0.609 0.516 0.437 0.833 0.694 0.579 0.82 0.402 0.54 0.513 0.467 0.424 0. 386 0.507 0.452 0.404 0.51 0.322 0.456 0.400 0.35] 0.30B 0.270 0.432 0.376 0.327 0.24 0.247 0.410 0.354 0.305 0.263 0.227 0.70 0.314 0.266 0225 0.191 0.335 0.279 0.233 0194 0.162 0.350 0.319 0.290 0.263 0.29 0.287 0.257 0.229 0.205 0.183 0.27 0.208 0.182 0.160 0.140 0.215 0.187 0.168 0.141 0.123 0.195 0.168 0.145 0.125 0.108 0.162 0.137 0.116 0.099 0.084 0.135 0112 0093 0.078 0.05 0.218 0198 0.180 0.164 0.149 0.163 0.146 0.130 0.116 0.104 0.123 0.108 0.095 0.083 0.073 0.107 0.093 0.081 0.070 0.061 0.093 0.00 0.069 0.060 0.051 0.071 0.060 0.051 0.43 0.037 0.054 0045 0.038 0.031 0.026 0.135 0.123 0.112 0.102 0.092 0.093 0.083 0.074 0.066 0.059 0.064 0.056 0.049 0.043 0.08 0.053 0.046 0.040 0.035 0.030 0.031 0.026 0.022 0.019 0.016 0.022 0.018 10.015 0.013 0.010 0.04 0.08 0.033 0.028 0.024 0.021 0.018 0.016 0.014 0.012 0. 084 0.076 0.069 0.063 0.057 0.053 0.47 0.42 0.037 0.033 0.033 0.029 0.026 0.022 0.020 0.026 0.023 0.020 0.017 0015 0.014 0.011 0.010 0.008 0.007 0.009 0.007 0.006 0.005 0.004 0.022 0.011 0.005 0.04 0.003 0.001 0.001 0.009 0.003 0.001 0.001 0.001