Long-term investment decision and NPV method

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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 books for the master’s program will have an up-front cost of $50,000. 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 up-front cost). On average, a person with an MBA degree earns an extra $20,000 per year (after taxes) over a business career of 40 years. Jenny believes that her opportunity cost of capital is 6%. Given her estimates, find the net present value (NPV) of entering this MBA program. Are the benefits of further education worth the associated costs? Please show all formulas and work.

Reference no: EM131055121

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