Week 3- Discussion Forum 1

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University Of Arizona *

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629

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Finance

Date

Feb 20, 2024

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2

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I am fortunate to work for an employer that supports higher education and provides ample career development and advancement opportunities. The company allocates $12,000 annually for educational pursuits. My decision to pursue an MBA stemmed from contemplating my desired position upon retirement. Research showed that at least 90% of individuals in that prospective role held either an MBA or a Ph.D. The MBA program consists of 13 classes, each priced at approximately $2,543, covering tuition, technology, course materials, and auto sales tax. The program costs around $32,500, with my employer contributing $5,250 annually and the remainder covered by school grants. Assuming a 10% increase in income in the next position, the annual payment (pmt) would be $13,366. NPV considers the time value of money, providing a method to assess and compare the rates of return across various projects. In this context, it serves as a valuable tool to evaluate the projected rate of return, aiding in determining the time value of money when deciding between pursuing an MBA or not, as Fernando (2023) expressed As Block et al. (2022) highlighted, the Net Present Value (NPV) represents the sum of present values related to cash flows minus the initial investment cost. Employing Excel functions for these calculations, the NPV is determined as $567,623, considering an initial investment of $32,500, a timeframe of 26 years, and an interest rate (i) of 5%. Now, let's explore the scenario if the initial investment of $32,500 were to be invested at a 5% interest rate for 26 years. Utilizing Excel for the computation, the future value is calculated. The results reveal a significant
financial advantage in pursuing an MBA, with an NPV of $567,623, compared to $115,559 without an MBA. References Block, S. B., Hirt, G. A., & Danielsen, B. R. (2022). Foundations of financial management (18th ed.).McGraw-Hill Higher Education. Fernando, J. (2023, December 22). Net present value (NPV): What is means and steps to calculate it? Investopedia. https://www.investopedia.com/terms/n/npv.asp Links to an external site.
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