Respond to your classmates by commenting on their posts with constructive comments that move the conversation forward. In addition, responding to the instructorâ€™s questions or comments is mandatory. Provide opportunities to demonstrate your content expertise, critical thinking, and real-world experiences with the discussion topics.Â
minimum of 100 words eachÂ
Net present value (NPV) is often the preferred investment selection method as it allows
the stakeholders to understand what kind of return is expected while accounting for the
time value of money (Block et al., 2022). NPV is the sum of present values of all outflows
and inflows related to a project. Inflows that arrive in later years must provide a return
that at least equals the cost of the invest capital years prior (Fernando, 2022).
In this weekâ€™s scenario, we are looking at our investment of obtaining an MBA versus
what we expected our payoff will be in future years. Although my employer sponsors my
MBA, this program costs $740 per credit. With 39 credits in this program, the
investment, or opportunity cost, is around $30,000.
If I donâ€™t get the MBA, I will have saved $30k, but my salary will stay the same. This
means I can only invest $20k a year. If I plan to keep working at the same job with the
same income every year, then I can use equation 9-5 (below) for Future Value for
annuities. With initial investment of $0, but able to invest $20k for 20 years with a 6%
return, I would have $735,711.82.
If I get the MBA, I will have spent $30,000, but I anticipate I will move to a managerial
role within 5 years with a higher salary that will allow me to invest $50k a year. Using
equation 9-5, with number of periods as 15 years, 6% interest, a $50k recurring
investment, and -$30,000 starting amount, I will have made $1,091,901.75. These
calculations prove the MBA is a good investment, barring the assumptions made come
Block, S. B., Hirt, G. A., & Danielsen, B. R. (2022). Foundations of financial
management (18th ed.). McGraw-Hill Higher Education.
Fernando, J. (2022, November 15). Net Present Value (NPV). Retrieved from
Week 3 Discussion 1
Due to my years of honorable service to the Marine Corps, I was blessed to utilize my
GI Bill to take MBA courses in a manner in which the expenses of attending this
particular university are covered.
Nevertheless, I will calculate the Present Net Value (NPV) as if I paid for it out of
pocket. After calculating the cost of each course along with the technology fee and the
average cost of books and materials, the entire cost of this program would be $30,390.
Our textbook (Block et al., 2019) defines NPV as the most standard method employed t