Homework: Net Present Value Analysis
In this homework you will perform a Net Present Value Analysis for a project.
Assume a student is planning to pursue a two-year master's degree. There are two educational options the student is considering, with investment and cash flows as follows.
Option 1: Full-Time Education Example cash investment: $100,000. Currently the student is earning $30,000. The student will quit his/her current job to study a Master's degree in computer science. Upon graduation the student hopes to earn $60,000 per year in new job.
Option 2: Part-Time Education Example cash investment: $100,000. Currently the student is earning $30,000. The student can work part-time for three years at a salary of $20,000 while studying towards the master's degree in project management. Upon graduation the student anticipates a possible increase in salary by $10,000 (total $40,000) in the same company.
The requirements for the homework are:
Answer the following questions based on the unit readings:
• Briefly describe what net present value is, how it is calculated, and what it is used for.
• Calculate the NPV for each educational option. The discount rate is 8%.
• Which option should the student choose? Explain your decision including any necessary assumptions made.
Format your homework according to the give formatting requirements:
1. The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the homework, the course title, the student's name, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length