Assignment:
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. For your calculations you can assume all payments and income are incurred-received at the end of each year.
a. Calculate the net present value of this investment assuming he can borrow/save at an interest rate of 5%.
b. Calculate the internal rate of return from the investment in education.
c. Based on the NPV and IRR, should he undertake the program? Why?