1.(Calculate with Excel only) Consider Bob, who just turned 18 years old and is about to...

1.(Calculate with Excel only) Consider Bob, who just turned 18 years old and is about to embark on a four-year degree program. The tuition for the course is $20,000 per year. Bob currently works at Vons making $18,000 per year and will have to surrender his job to pursue the degree. Based on the BLS Occupational Handbook Bob anticipates his earnings will be $25,000 more each year following graduation (starting when he turns 22) until he retires on his 60th birthday. He anticipates his incremental earnings will increase by 4% each year of his career. For your calculations, you can assume all payments and income are incurred-received at the end of each year and that he can borrow/save at an interest rate of 6%.

a.Calculate the net present value of this investment.

b.Calculate the internal rate of return from the investment in education (round answer to a whole percent).

c.Based on the NPV and IRR, should he undertake the program? Why?

*please explain excel inputs to solve if possible*

Solutions

Expert Solution

IRR is determined utilizing the IRR work in Excel, with info being the variety of cells containing the money streams from year 1 to year 42

IRR = 17%

in light of NPV and IRR, he ought to embrace the program as NPV is certain, and IRR is higher than the obtaining/sparing expense of 6%

Rahul Sunny answered 1 year ago

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