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09 Jul Calculating the NPV of a master's degree (Please do it for an MBA)

Posted at 01:03h in General Questions by

Instructions for Group Project:  Computing the NPV of a Two-Year Masters Degree

  1. The topic of this team research assignment is to estimate the return on a two-year masters degree.  You may choose any type of master’s degree.
  2. Work with your assigned study group and use the Excel spreadsheet in the assignment module as template for computing the NPV.  In other words, I’ve given you this Excel spreadsheet that has the cells programmed.  You can use that if you want, or venture into something else.   Just because my template only has 10 years doesn’t mean you should assume that the hypothetical individual will only work 10 years after his or her master’s degree.  Who retires when they are 35 years old?!  Extend the spreadsheet to assume a reasonable retirement age. 
  3. The assumptions on earnings (how much do you earn with a bachelors degree compared to a masters degree), earnings growth (how much do earnings grow over the worker’s entire career; related, how long does the career last), costs of a masters degree (tuition, fees, books, etc.), and discount rates (see the lecture notes) must be grounded in empirical facts to the extent possible.  Be sure to cite your sources for the assumptions.  You must do your own research here about the assumptions. Please write a paragraph or two about your assumptions and why you made them and where you found them.
  4. The main result of your analysis is to compute a NPV for the proposed investment in education.  Please discuss what your result means in relationship to the decision to pursue a masters degree.   
  5. Please also comment on what considerations outside the NPV analysis may affect the decision to pursue a masters degree.
  6. Please don’t hesitate to ask me any questions.  

 I have included the Excel Spreadsheet 

Deliverable: 

  1. An Excel spreadsheet with the NPV calculations and graphical representations of experience-earnings or age-earnings profiles.
  2. A narrative that explains your assumptions and discusses the implications for whether it is feasible to pursue a masters degree, including issues outside the numerical analysis that may affect your decision.  So, I’d like to see a 2-3 page report with an excel spreadsheet attached. I’ll take point off if all your names aren’t on the cover sheet.

Rubric

Computing the NPV of a Master’s Degree

Computing the NPV of a Master’s Degree
Criteria Ratings Pts
Assumptions

Were the assumptions about starting salary with and without a master’s degree, the discount rate, direct cost, growth rate in salary over time for those with and without a master’s degree reasonable and documented with citation
 
 

8 pts

Exemplary
All the assumptions were reasonable and listed on the Excel spreadsheet. They were discussed in the write-up. The rationales behind each were provided along with citations to support the rationales.
 

7 pts

Good
All the assumptions were listed on the Excel spreadsheet. Some were discussed in the write-up. The rationales provided were not entirely logical or were weak.
 

6 pts

Satisfactory
All the assumptions were listed on the Excel spreadsheet. The discussion of the assumptions in the write-up was incomplete. The rationales behind each were either not provided or not cited.
 

4 pts

Unsatisfactory
The assumptions were obviously wrong and there was little in the way of discussion or citation.
8 pts
Computation of the NPV

The computation of the NPV was done in a clear, accurate and professional manner in an Excel spreadsheet, or an equivalent software package.
 
 

8 pts

Exemplary
The computation of the NPV of a master’s degree was conducted using a spreadsheet software package. It clearly detailed the age-earnings profiles of the two courses of action – master’s degree, bachelor’s degree. The spreadsheet is programmed correctly. The NPV result makes sense. The graph of the age-earnings profiles appear reasonable and are at least somewhat similar to the graphs in the lecture notes.
 

7 pts

Good
The computation of the NPV of a master’s degree was conducted using a spreadsheet software package. It clearly detailed the age-earnings profiles of the two courses of action – master’s degree, bachelor’s degree. The spreadsheet programming is obviously not correct. The NPV result doesn’t make logical sense according to what occurs in the real world of earnings. The graph of the age-earnings profiles are not similar to the graphs in the lecture notes.
 

6 pts

Satisfactory
The computation of the NPV of a master’s degree was conducted using a spreadsheet software package. The age-earnings profiles of the two courses of action – master’s degree, bachelor’s degree – are not realistic. The spreadsheet is not programmed correctly – there are obvious errors. The NPV result makes little sense. The graph of the age-earnings profiles are not similar to those in the lecture notes.
 

4 pts

Unsatisfactory
The spreadsheet is not programmed correctly. It does not follow from the assumptions, or the assumptions are so unreasonable that any NPV figure makes no sense.
8 pts
Report Quality

The report is structured well, written professionally, assembled so as to be professional and aesthetically pleasing, and fully and consistently cited. Rule of thumb. Is the report something you would be willing to submit to your boss who is soon making a decision on your promotion?
 
 

4 pts

Exemplary
Structured well e.g. section headings, properly formed paragraphs and sentences. Professional language with very few grammatical or typographical errors.
 

3 pts

Satisfactory
Structure is good by some of the sentences and paragraphs are not properly formed paragraphs. Language is mostly professional language but some lapses into colloquial language. A moderate number of grammatical or typographical errors.
 

2 pts

Unsatisfactory
Not structured well (e.g. no section headings, improperly formed paragraphs and sentences). the tone of the writing is not professional language with many grammatical or typographical errors.
4 pts
Total Points: 20

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