Microsoft Office Tutorials and References
In Depth Information
ASSIGNMENT 2: USING THE SPREADSHEET FOR DECISION SUPPORT
Make a note of your answer to Question 1 on the face of the spreadsheet or on paper. You will record
your answer in a memo later.
At a 4% investment rate, the illustrative data shows that completing the degree in four years is a
worthwhile investment because the NPV is positive. If the student stays for a fifth year, the degree is still worth it.
However, it is not worthwhile if the student stays for two extra years. At 1%, the investment is worthwhile
regardless of whether the student stays for four, five, or six years, but notice how much better the value is if
the student graduates in four years rather than six. The two extra years at college amount to a $355,000
penalty! From this data, you would have to conclude that prolonging college for a year or two can result in
a significant financial penalty.
Question 2: How do two schools compare in their financial impacts? In this example, assume that the
private school charges much more than the state school, but that the target degree and job are the same. The
private school
s prestige means a somewhat higher starting salary. The inputs for answering the question are
shown in Figure 10-9.
Data About the College:
State
Private
Tuition and Fees
25,000
55,000
Room and Board
13,000
30,000
Books and Supplies
3,000
5,000
Cost Increase: Tuition and Fees
11%
10%
Cost Increase: Room and Board
10%
9%
Cost Increase: Books and Supplies
7%
7%
College Grad Salary & Benefits
50,000
53,000
Data About You:
Number of Years in College (4, 5, or 6)
5
5
Work Region (NE, SE, NW, SW, MID)
SE
SE
High School Grad Salary & Benefits
35,000
35,000
Low Risk Investment Rate (XX)
1%, 4%, 7%
1%, 4%, 7%
FIGURE 10-9
Question 2 input data
Enter the inputs for one school, then vary the interest rate. Observe the NPV values in the Key Results
area, and then manually record them in a data collection area at the top of the Inputs area. Change the inputs
for the other school, and vary the interest rate. Observe and record the NPV values. You should record six
data points. Copy the data to a new worksheet for graphing purposes, and name the sheet Two Colleges.
Create a chart from the data.
Make a note of your answer to Question 2 on the face of the spreadsheet or on paper. Is one school a
much better financial choice than the other? If so, play
with the starting salary of the poorer choice
at the 4% level to see where the schools are equal financially. Make a note of the break-even salary levels. You
will record your answers in a memo later.
Question 3: Assume that a student is not sure where to work after graduation. The regional choices are
NE and SW. How much does the work region matter? The inputs for answering the question are shown in
Figure 10-10.
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