Login

Create Account
+14156709189
info@expertsmind.com
Submit Homework/Assignment
Get quote & make Payment
Get Solution
Mr, Corporate Finance
PROBLEM 1
A friend of yours, employed as a Tier 2 field service representative for a telephony corporation, wants your help as a financial specialist to determine the financial consequences associated with investing in education. One alternative is to enroll in an MBAprogram and the other alternative is to attain a certification in network design. Your friend has provided you the following information:
General
• The current salary of $40 000 is paid once at the end of each year.
• The salary is expected to grow at a rate of 3% per year and your friend is expected to work for another 35 years (until retirement)
• Your friend’s income tax level is expected to be 25% forever
• Your friend’s current discount rate is 10% and is expected to stay at this level forever unless no further education investment is made.
• Today is the 1st of January 2013
The network design certification education
• The education starts immediately and ends 31st of December 2013
• The course fee is $5 000, to be paid today.
• The certificate implies a promotion and a salary increase of $10 000. The new salary will be paid starting December 31st 2014 and onwards.
• Due to that the education runs on evenings no salary loss is expected during the education
• Upon completion of the education your friend’s new discount rate will become 11%
The mbaprogram education
• The education starts immediately and ends the 31st of December 2013
• If enrolling your friend will earn no salary during 2013
• The tuition fee is $20 000, to be paid today
• An MBA degree implies a managerial position in the company and a salary increase of $20 000 . The new salary will be paid starting December 31st 2014 and onwards.
• Upon completion of the MBAprogram your friend’s new discount rate will be 13% (following higher risk of income decrease)
Your task
Your task is to create a spreadsheet model (using Microsoft Excel) showing your friend which alternative is to prefer from a financial point of view. In particular your friend wants you to show her the following in the spreadsheet model:
a) Show by calculation the net present value for the three alternatives (no education, network design certification, mba). Also, according to NPV suggest which alternative you advise your friend to choose
b) Show by calculation (creating a formula) the discount rate (by replacing the 13% given above) at which your friend ought to be indifferent between not investing in education and investing in the MBA education (assuming she will complete it successfully).
c) Your friend is a bit uncertain about what her discount rate will be if completing an MBA. Therefore she wants you to show in a graph the NPV (with and without income tax) for different discount rates. Use the interval 0% to 100% with 5% subintervals. Set the yaxis as NPV and use the xaxis for the discount rates.
Finally, since your friend wants to be able to use this spreadsheet in the future as well you need to use cell references in the formulas (for tasks a, b and c above).
Posted Date: 12/29/2012 2:43:12 PM  Location : Sweden
Ask an Expert
Related Discussions:
Mr, Assignment Help, Ask Question on Mr, Get Answer, Expert's Help, Mr Discussions
Write discussion on Mr
Your posts are moderated
Write your message here..
Related Questions
Derive the fund separation theorem, Question 1: (a) What are the compe...
Question 1: (a) What are the competing theories which have been put forward to explain the term structure of interest rates? Which theories do the evidence tend to support?
Find weighted average cost of capital  yield to maturity, Monsanto Company...
Monsanto Company has 3 million shares, selling at $25 each. The company has just paid a dividend of $1.35 and the next year's dividend is expected to be $1.50, which is in line wit
Valuation, Hello, What are the similarities and differences between project...
Hello, What are the similarities and differences between project valuation and firm valuation. For example, using DCF model, by forecasting free cash flow, weighted average cost of
WACC, WACC calculation
WACC calculation
Expert triangulation  forecasting methods, Method is the ?rst of two metho...
Method is the ?rst of two methods proposed by Mantrala and Rao (2001) and has been reviewed in Section 2.We use a simpli?ed version, with ?xed prices and for a single period. Furth
Risk, Risk means balancing between profitability and longterm growth. If a...
Risk means balancing between profitability and longterm growth. If a company looks at shortterm goals, it may go in for profit maximization but it will find it difficult to susta
Calculate the price of maturity assuming, a) Calculate the price of a Eu...
a) Calculate the price of a European style call option with 6 months left to maturity assuming a riskfree rate of 3.5% and a nondividend paying stock which can change in price
Weighted average cost of capital, A tax rate of 20% has been introduced in ...
A tax rate of 20% has been introduced in the Frog Islands Republic. The value of Sun corporation is now 100.000€. Bright Star Co. debt has no changed. The required rate of return t
Participative budgeting, You are required to provide an essay or report of ...
You are required to provide an essay or report of approx 500 words or less (excluding attachments and references), accompanied by relevant calculations, in MS Word orPDF format ac
Net present value of project, Net present value of this project: ...
Net present value of this project: The following I/S is based on the information associated with a new project. Answer the questions. Projected Income Statem
Assignment Help
Accounting Assignment Help
Economics Assignment Help
Finance Assignment Help
Statistics Assignment Help
Physics Assignment Help
Chemistry Assignment Help
Math Assignment Help
Biology Assignment Help
English Assignment Help
Management Assignment Help
Engineering Assignment Help
Programming Assignment Help
Computer Science Assignment Help
IT Courses and Help
ExpertsMind Services
Online Tutoring
Projects Assistance
Exam Preparation
Coursework Help
Programming Courses
Engineering Courses
Why Us ?
~Experienced Tutors
~24x7 hrs Support
~Plagiarism Free
~Quality of Work
~Time on Delivery
~Privacy of Work