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:General• 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 2013The 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 taskYour 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 chooseb) 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).
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Can pay good money. Couldnt choose another amount in the field so I wrote here instead.
Deadline 4 days starting from now.