Master’s of Accountancy Degree at Central University Costs

Master’s of Accountancy Degree at Central University Costs in $8 only (Instant Download)

A Master’s of Accountancy degree at Central University costs $12,000 for an additional fifth year of education beyond the bachelor’s degree. Assume that all tuition is paid at the beginning of the year. A student considering this investment must evaluate the present value of cash flows from possessing a graduate degree versus holding only the undergraduate degree. Assume that the average student with an undergraduate degree is expected to earn an annual salary of $50,000 per year (assumed to be paid at the end of the year) for 10 years after graduation. Assume that the average student with a graduate Master’s of Accountancy degree is expected to earn an annual salary of $66,00 per year (assumed paid at the end of the year) for nine (9) years after graduation. Assume a minimum required rate of return of 10%:

  1. Determine the net present value of cash flows from an undergraduate degree.
  2. Determine the net present value of cash flows from a Master’s of Accountancy degree, assuming no salary is to be earned during the graduate year of schooling.
  3. What is the net advantage or disadvantage of pursuing a graduate degree under these circumstances?

The answer should be in 3 pages and supported by articles journal references.

Sample Answer:

….The best method to evaluate a Capital Budgeting proposal is the NPV method or discounted Cash Flow method. The word “net” in this term indicates that the entire cash flows-positive or negative are considered. This method takes into account the concept of time value of money…..

Year 0 2 to 10
-$12,000.00
Annual Salary $66,000.00
….
Net Cash Flow
* Present value annuity factor @10% 1 5…..
Present….. -$12,000.00 $…….
NPV (sum of all present value of cash flows) $333,576.00

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