Question

In: Statistics and Probability

How do i answer the following question on excel? Consider attending one of the following two...

How do i answer the following question on excel?

Consider attending one of the following two colleges as a full-time student. One is a public university with low tuition, while the other is a prestige university (they are both in the same city, so housing costs should be equal for each). Suppose you qualify for a partial scholarship at the private university. The financial information corresponding to attending each school is as follows.
Public university ​ Private University
Tuition and related expenses four years at: $3500 per year $29,000 per year
Earnings per year for first 5 years ​ $39,000 per year $56,000 per year
Earnings per year for next 10 years ​ $72,000 per year​ $89,000 per year
Earnings per year for next 17 years ​$88,000 per year​ $118,000 per year
Earnings per year for next 12 years ​$74,000 per year​ $90,000 per year​​
Assuming the decision will be made solely on net financial returns grounds, a) Calculate the present value of associated with attending each college using a three percent (3%) interest (i.e. discount) rate, and b) repeat the calculation using an 9.5% interest rate. C) explain whether the difference in interest rates did or did not change the financial decision.

Solutions

Expert Solution

It is actually a simple calculation. We need to sum up the present values over the 48 years. This can be done as shown below. This table is for 3% discount rate

Public University Private University
Index Time Monetary Value Present Value Monetary Value Present Value
0 Year 1 -3500 -3500.00 -29000 -29000.00
1 Year 2 -3500 -3398.06 -29000 -28155.34
2 Year 3 -3500 -3299.09 -29000 -27335.28
3 Year 4 -3500 -3203.00 -29000 -26539.11
4 Year 5 39000 34650.99 56000 49755.27
5 Year 6 39000 33641.74 56000 48306.09
6 Year 7 39000 32661.89 56000 46899.12
7 Year 8 39000 31710.57 56000 45533.12
8 Year 9 39000 30786.96 56000 44206.92
9 Year 10 72000 55182.00 89000 68211.09
10 Year 11 72000 53574.76 89000 66224.36
11 Year 12 72000 52014.33 89000 64295.49
12 Year 13 72000 50499.35 89000 62422.81
13 Year 14 72000 49028.50 89000 60604.67
14 Year 15 72000 47600.48 89000 58839.48
15 Year 16 72000 46214.06 89000 57125.71
16 Year 17 72000 44868.02 89000 55461.86
17 Year 18 72000 43561.18 89000 53846.46
18 Year 19 72000 42292.41 89000 52278.12
19 Year 20 88000 50185.17 118000 67293.75
20 Year 21 88000 48723.47 118000 65333.74
21 Year 22 88000 47304.34 118000 63430.81
22 Year 23 88000 45926.54 118000 61583.32
23 Year 24 88000 44588.87 118000 59789.63
24 Year 25 88000 43290.17 118000 58048.18
25 Year 26 88000 42029.29 118000 56357.46
26 Year 27 88000 40805.14 118000 54715.98
27 Year 28 88000 39616.64 118000 53122.31
28 Year 29 88000 38462.75 118000 51575.06
29 Year 30 88000 37342.48 118000 50072.87
30 Year 31 88000 36254.83 118000 48614.44
31 Year 32 88000 35198.87 118000 47198.48
32 Year 33 88000 34173.66 118000 45823.77
33 Year 34 88000 33178.31 118000 44489.10
34 Year 35 88000 32211.95 118000 43193.30
35 Year 36 88000 31273.74 118000 41935.24
36 Year 37 74000 25532.40 90000 31052.92
37 Year 38 74000 24788.74 90000 30148.46
38 Year 39 74000 24066.74 90000 29270.35
39 Year 40 74000 23365.76 90000 28417.82
40 Year 41 74000 22685.21 90000 27590.12
41 Year 42 74000 22024.47 90000 26786.52
42 Year 43 74000 21382.98 90000 26006.33
43 Year 44 74000 20760.18 90000 25248.86
44 Year 45 74000 20155.51 90000 24513.46
45 Year 46 74000 19568.46 90000 23799.48
46 Year 47 74000 18998.50 90000 23106.29
47 Year 48 74000 18445.15 90000 22433.29
1577227.43 1953932.18

We need just the one simple formula,

For ex, in this table the formula you need to put on excel for Present Value is Monetary Value, divided by 1.03 power the index. Below is how I did this on excel, you can see formula at top

So at 3% discount rate, we should go with private university. Let us repeat the calculation by changing 3% to 9.5%

Public University Private University
Index Time Monetary Value Present Value Monetary Value Present Value
0 Year 1 -3500 -3500.00 -29000 -29000.00
1 Year 2 -3500 -3196.35 -29000 -26484.02
2 Year 3 -3500 -2919.04 -29000 -24186.32
3 Year 4 -3500 -2665.79 -29000 -22087.96
4 Year 5 39000 27127.40 56000 38952.16
5 Year 6 39000 24773.88 56000 35572.75
6 Year 7 39000 22624.55 56000 32486.53
7 Year 8 39000 20661.69 56000 29668.06
8 Year 9 39000 18869.12 56000 27094.12
9 Year 10 72000 31813.06 89000 39324.48
10 Year 11 72000 29053.02 89000 35912.76
11 Year 12 72000 26532.44 89000 32797.04
12 Year 13 72000 24230.54 89000 29951.64
13 Year 14 72000 22128.35 89000 27353.09
14 Year 15 72000 20208.53 89000 24979.99
15 Year 16 72000 18455.28 89000 22812.78
16 Year 17 72000 16854.14 89000 20833.59
17 Year 18 72000 15391.91 89000 19026.11
18 Year 19 72000 14056.54 89000 17375.44
19 Year 20 88000 15689.69 118000 21038.45
20 Year 21 88000 14328.49 118000 19213.20
21 Year 22 88000 13085.37 118000 17546.30
22 Year 23 88000 11950.11 118000 16024.02
23 Year 24 88000 10913.35 118000 14633.81
24 Year 25 88000 9966.53 118000 13364.21
25 Year 26 88000 9101.85 118000 12204.75
26 Year 27 88000 8312.19 118000 11145.89
27 Year 28 88000 7591.04 118000 10178.90
28 Year 29 88000 6932.46 118000 9295.80
29 Year 30 88000 6331.01 118000 8489.31
30 Year 31 88000 5781.75 118000 7752.80
31 Year 32 88000 5280.13 118000 7080.18
32 Year 33 88000 4822.04 118000 6465.92
33 Year 34 88000 4403.69 118000 5904.95
34 Year 35 88000 4021.63 118000 5392.65
35 Year 36 88000 3672.73 118000 4924.79
36 Year 37 74000 2820.48 90000 3430.32
37 Year 38 74000 2575.78 90000 3132.71
38 Year 39 74000 2352.31 90000 2860.92
39 Year 40 74000 2148.23 90000 2612.71
40 Year 41 74000 1961.86 90000 2386.04
41 Year 42 74000 1791.65 90000 2179.03
42 Year 43 74000 1636.21 90000 1989.98
43 Year 44 74000 1494.25 90000 1817.34
44 Year 45 74000 1364.62 90000 1659.67
45 Year 46 74000 1246.22 90000 1515.68
46 Year 47 74000 1138.10 90000 1384.18
47 Year 48 74000 1039.37 90000 1264.09
484252.42 549270.84

The choice is still private university, as its net present value is greater


Related Solutions

Using the appropriate function or routine in excel Consider attending one of the following two colleges...
Using the appropriate function or routine in excel Consider attending one of the following two colleges as a full-time student. One is a public university with low tuition, while the other is a prestige university (they are both in the same city, so housing costs should be equal for each). Suppose you qualify for a partial scholarship at the private university. The financial information corresponding to attending each school is as follows. Public university ​ Private University Tuition and related...
6. I suggest using Excel to answer this question. Consider the following distribution of polymer chains:...
6. I suggest using Excel to answer this question. Consider the following distribution of polymer chains: 5 chains of degree of polymerization 10 25 chains of degree of polymerization 100 50 chains of degree of polymerization 500 30 chains of degree of polymerization 1000 10 chains of degree of polymerization 5000 5 chains of degree of polymerization 50,000 (a) Calculate the number and weight average degree of polymerization and polydispersity of this collection of polymer chains. (b) If these chains...
Please answer in excel only. How do I create the graphs in excel and show the...
Please answer in excel only. How do I create the graphs in excel and show the data. Discuss the following two cost functions: TC=20+4Q TC=20+2Q+0.5Q^2 a) Calculate all cost curves and plot these curves on graphs. Total Cost Total Fixed Cost Total Variable Cost Average Total Cost Average Fixed Cost Average Variable Cost Marginal Cost b) In each case, indicate the point at which diminishing returns occur. (For question a), compute the required costs and plot the curves for quantities...
**** DO NOT SOLVE IN EXCEL!!!!**** I need the actual formula & steps!! Consider the following...
**** DO NOT SOLVE IN EXCEL!!!!**** I need the actual formula & steps!! Consider the following hypotheses and sample​ data, and then complete parts a and b below using α=0.05 H0​:μ≤16 H1​:μ>16 2121      1818      1313      1717      2323      1919      1616      1919      1818      1616   I am getting the p-value wrong on all of these... I need to know the steps to solve p-value, please. I get all of the other stuff right, just not the p-value :(
Hi there, for this question. I found the answer in excel sheet to be negative. is...
Hi there, for this question. I found the answer in excel sheet to be negative. is ther something wrong with my calculation: Using the approach covered in your textbook calculate the geometric average annual rate of return over five years given the following annual rates, year 1 = 5.10%, year 2 = 4.95%, year 3 = 4.83%, year 4 = 4.75% and year 5 = 4.70% . What is the arithmetic average? Explain the difference. (Rates as a percentage accurate...
I need to know how to answer this question only in Excel. Please include instructions, screenshots,...
I need to know how to answer this question only in Excel. Please include instructions, screenshots, etc. in Excel which explain the process (formulas included). TropSun is a leading grower and distributer of fresh citrus products with three large citrus groves scattered around central Florida in the cities of Orlando, Eustis, and Winter Haven. TropSun currently has 275,000 bushels of citrus at the grove in Mt. Dora, 400,000 bushels at the groves in Eustis, and 300,000 bushels at the grove...
How do I answer this auditing question: Describe how would you perform the following planning activities...
How do I answer this auditing question: Describe how would you perform the following planning activities and give reasons as to why you would carry out the procedures mentioned to: 1. Gain an understanding of Grafton (Pty) Ltd and its environment. 2. Gain an understanding of Grafton (Pty) Ltd's internal controls. 3. Identify and assess the risks of material misstatement 4. Make a preliminary judgement of materiality. Please assist with the best approach to respond to this question. Thank you.
using one of Murchie’s examples of a super-organism, answer both of the following: [i] how do...
using one of Murchie’s examples of a super-organism, answer both of the following: [i] how do super-organisms exemplify transcendence? [ii] how is a super-organism like a Type-1 Entity [in McKenna's sense]?
Briefly Give one to two line logical answer to the following Question (a)IN PCM How the...
Briefly Give one to two line logical answer to the following Question (a)IN PCM How the parameters fieldlity bandwidth and time delay can be traded off? (b)If the number of bits in signal to noise ration is increased what will be its effect?How to reduce signal to noise ratio?If number of bits are incraesed signal to noise ratio is decrease? (c)non unform quantization is better than uniform quantization? (d)Why is it often preffered to use units of normalized bandwidth,WT,comapred with...
How do I plug in the finite function in excel?
How do I plug in the finite function in excel?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT