Customer Service Chat
Get quote & make Payment
Mr, Corporate Finance
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 MBA-program and the other alternative is to attain a certification in network design. Your friend has provided you the following information:
• 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 mba-program 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 MBA-program your friend’s new discount rate will be 13% (following higher risk of income decrease)
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 y-axis as NPV and use the x-axis 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
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..
Explain static theory of capital structure, Question 1: (a) Show the fo...
Question 1: (a) Show the forces driving cross-border mergers that operate more strongly than the reasons for transactions that take place within a given country's border. (b
Hybrid paying method taxation and raising cash , Finance There are var...
Finance There are various ways of making a payment for M&A. Cash, stock-swap and combination of both. The hybrid paying method is commonly used method for most of organisations
Growthg and assets, a firm wishes to maintain an internal growth rate of 6....
a firm wishes to maintain an internal growth rate of 6.5% and the dividend payout ratio of 25%. The current profit margin is 6%, and the firm uses no external financing sources. Wh
Calculate each partys net borrowing cost, Question: A U.S company has a...
Question: A U.S company has a liability of € 10 million in fixed rate loans outstanding at 6%. A German company has a $15 million Floating Rate Note outstanding at LIBOR. The e
Mergers & acquisitions , Mergers & Acquisitions now is playing crucial role...
Mergers & Acquisitions now is playing crucial role in modern corporate finance world. For any prospects, there is only one reason for a firm making an offer to M&A another firm,
D, differentiate between allocative efficiency and pricing efficiency
differentiate between allocative efficiency and pricing efficiency
Operational research, Fisher and Raman (1996), Fisher et al. (2001) propose...
Fisher and Raman (1996), Fisher et al. (2001) propose to let a number of experts within a company estimate the demand for a product. The demand is calculated as the average of the
Venture, what is a co op society and its bye laws
what is a co op society and its bye laws
Construct a table that shows the profit and payoff, Question: i) The ...
Question: i) The treasurer of a corporation is trying to choose between options and forwards contracts to hedge the corporation's foreign exchange risk. Discuss the relative
Financial Modeling, I have an assignment
I have an assignment
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
Why Us ?
~24x7 hrs Support
~Quality of Work
~Time on Delivery
~Privacy of Work
Human Resource Management
Literature Review Writing Help
Follow Us |
T & C
Copyright by ExpertsMind IT Educational Pvt. Ltd.