Long-term investment decision, NPV methodJenny Jenks has researched the financial pros and cons of entering into a 1-year MBA program at her state university. The tuition and needed books for a master's program will have an upfront cost of

$55,000.

If she enrolls in an MBA program, Jenny will quit her current job, which pays

$50,000

per year after taxes (for simplicity, treat any lost earnings as part of the upfront cost). On average, a person with an MBA degree earns an extra

$21,000

per year (after taxes) over a business career of

38

years. Jenny believes that her opportunity cost of capital is

6.7%.

Given her estimates, find the net present value (NPV) of entering this MBA program. Are the benefits of further education worth the associated costs?

The following time line depicts the cash flows associated with this problem:

The image is a timeline that shows the cash flows associated with an MBA program. The timeline extends from Year 0 to Year 38. The cash flow from Year 0 to Year 38 is labeled Tuition (CF subscript 0). The timeline shows a negative cash flow of 105,000 dollars for Year 0. The timeline shows positive cash flows from Year 1 to Year 38. The cash flows for Year 1 to Year 38 is labeled Extra earnings and is 21,000 dollars each.

0

1

2

38

Tuition (CF0)

$105,000

Extra earnings

$21,000

$21,000

$21,000

Question content area bottom

Part 1

The net present value (NPV) of entering this MBA program is

$enter your response here.

(Round to the nearest dollar.)