Capital Budgeting.

Please see attached. Please base figures on ‘typical’ college fees etc.

Capital Budgeting Assignment

Complete an assignment for capital budgeting:

· Calculate your investment for attending college (the amount you invested in paying fees, commuting, books, supplies etc.).

· Calculate your cash flows after you graduate.

· Calculate the incremental cash flows of the project (your studies at University of Colorado, Boulder)

Incremental cash flows are those that would accrue as a result of taking on a particular project (in this case your education) – incremental cash flows would imply the difference in cash flow between those that what would accrue without taking on the project and those that would accrue with taking on the project. If you are currently working then the difference between your current salary and the projected salary after you graduate may approximate incremental cash flow for the first year upon graduation. If you are not working then the difference between your salary with your current level of education (but without the degree you are currently pursuing) and the projected salary after your graduate may approximate the incremental cash flow.

· Assume a reasonable discount rate and justify why you chose the specific discount rate.

Each individual case is different and you may use different discount rates – it should be logical as to how you choose the discount rate. In determining the discount rate – you may use your risk and return as well as interest rates knowledge – build on your knowledge as you go along this course.

· Calculate the NPV for this project.

· Keep in mind the timing of the cash flows. Better to prepare a time-line.

The figures need not necessarily be your actual expenses. But be as realistic as possible on an approximate basis. You may assume that you will work up to the age of 70 after you graduate. Remember, this is an individual assignment and there is no exact answer as different people are in different situations.