Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Chapter 10, Problem 10.11P
Summary Introduction
To determine:
The
Introduction:
The difference between the present value of
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Long-term investment decision, NPV method Jenny Jenks has researched the financial pros and cons of entering intoa 1-year MBA program at her state university. The tuition and needed books for a master's program will have an upfrontcost of $52,000 . 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$22,000 per year (after taxes) over a business career of 37 years. Jenny believes that her opportunity cost of capital is 6.8%. Given her estimates, find the net present value (NPV) of entering this MBA program. Are the benefits of furthereducation worth the associated costs?
Long-term investment decision, NPV method Jenny 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 $52,000. If she enrolls in an MBA program, Jenny will quit her current job, which pays $50,000 per year (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 over a business career of 36 years. Jenny believes that her
opportunity cost of capital is 5.9%. 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:
36
Tuition (CFo)
- $102,000
Extra earnings
$21,000 $21,000
$21,000
The net present value (NPV) of entering this MBA program is $
(Round to the nearest dollar.)
Are the benefits of further…
Long-term investment decision, NPV method Jenny 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 $53,000. If she enrolls in
an MBA program, Jenny will quit her current job, which pays $50,000 per year (for simplicity,
treat any lost earnings as part of the upfront cost). On average, a person with an MBA
degree earns an extra $23,000 per year over a business career of 37 years. Jenny believes
that her opportunity cost of capital is 6.4%. 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:
Tuition (CFO)
Extra earnings
0
- $103,000
1
2
$23,000 $23,000
...
The net present value (NPV) of entering this MBA program is $
nearest dollar.)
...
37
$23,000
(Round to the
Chapter 10 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 10.1 - What is the financial managers goal in selecting...Ch. 10.2 - What is the payback period? How is it calculated?Ch. 10.2 - What weaknesses are commonly associated with the...Ch. 10.3 - How is the net present value (NPV) calculated for...Ch. 10.3 - Prob. 10.5RQCh. 10.3 - Prob. 10.6RQCh. 10.4 - Prob. 10.8RQCh. 10.4 - Prob. 10.9RQCh. 10.4 - Prob. 10.10RQCh. 10.5 - How is a net present value profile used to compare...
Ch. 10.5 - Prob. 10.13RQCh. 10 - Prob. 1ORCh. 10 - All techniques with NPV profile: Mutually...Ch. 10 - Elysian Fields Inc. uses a maximum payback period...Ch. 10 - Prob. E10.1WUECh. 10 - Prob. 10.2WUECh. 10 - Prob. E10.2WUECh. 10 - Axis Corp. is considering investment in the best...Ch. 10 - Prob. E10.3WUECh. 10 - Prob. 10.4WUECh. 10 - Prob. E10.4WUECh. 10 - Cooper Electronics uses NPV profiles to visually...Ch. 10 - Prob. E10.5WUECh. 10 - Payback period The Ball Shoe Company is...Ch. 10 - Payback comparisons Nova Products has a 5-year...Ch. 10 - Prob. 10.3PCh. 10 - Long-term investment decision, payback method Bill...Ch. 10 - Prob. 10.5PCh. 10 - Prob. 10.6PCh. 10 - Prob. 10.7PCh. 10 - Prob. 10.8PCh. 10 - Prob. 10.9PCh. 10 - Prob. 10.10PCh. 10 - Prob. 10.11PCh. 10 - Prob. 10.12PCh. 10 - NPV and EVA A project costs 2,500,000 up front and...Ch. 10 - Prob. 10.14PCh. 10 - Prob. 10.15PCh. 10 - Prob. 10.16PCh. 10 - Prob. 10.17PCh. 10 - Prob. 10.18PCh. 10 - Prob. 10.19PCh. 10 - Prob. 10.20PCh. 10 - Prob. 10.21PCh. 10 - Prob. 10.22PCh. 10 - Prob. 10.23PCh. 10 - Prob. 10.24PCh. 10 - All techniques with NPV profile: Mutually...Ch. 10 - Integrative: Multiple IRRs Froogle Enterprises is...Ch. 10 - Integrative: Conflicting Rankings The High-Flying...Ch. 10 - Problems with IRR White Rock Services Inc. has an...Ch. 10 - ETHICS PROBLEM Diane Dennison is a financial...Ch. 10 - Spreadsheet Exercise The Drillago Company is...
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