We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

“The Time Value of Money: Natasha Kingery Case

The whole doc is available only for registered users

A limited time offer! Get a custom sample essay written according to your requirements urgent 3h delivery guaranteed

Order Now

Here is a case about Natasha Kingery, 30 years old and has a Bachelor of Science degree in computer science. She is currently employed as a Tier 2 field service representative for a telephony corporation located in Seattle, Washington, and earns, $38,000 a year that she anticipates will grow at 3% per year. Natasha hopes to retire at age 65 and has just begun to think about the future. Natasha has $75,000 that she recently inherited from her aunt. She invested this money in 10-year Treasury Bonds. She is considering whether she should further her education and would use her inheritance to pay for it.

The objective of this case is to show the options for Natasha, so she can make intelligent decisions whether she will remain in her current job, take certifications or MBA degree. This paper should be able to answer the following questions: 1. Determine the interest rate she is currently earning on her inheritance by going to Yahoo Finance; 2. Create a timeline in Excel for her current situation as well as the certification program and MBA degree; 3. Calculate the present value of the salary differential for completing the certification program; 4. Calculate the present value of the salary differential for completing the MBA degree;

Option 1: Natasha can decide to remain in her current job. Under this option, Natasha will start earning $38,000 and her salary will increase by 3% a year as Natasha intends to work for 35 years. To calculate Natasha fortune under this option, you need to calculate the PV of her expected salaries or cash flows. PV of expected salaries or future cash flows under this option: PV= $1,143,820.22

Under Option 1, add the $75,000 to the PV of future salaries to find Natasha wealth as today. NPV=$75,000+ $1,143,820.22= $1,218,820.22
3.) Answer is Option 2: Attaining a Certification: If Natasha receives a certification, she will earn$10,000 more than what she is currently earning, that is $48,000 and the salary will increase 3% a year. But the certification will cost $5,000 payable at the beginning of the program. The certification program lasts for one year. Like above, to value Natasha fortune, compute the expected salaries. PV of expected salaries or future cash flows under this option: PV=$1,426,696.97

Under Option 2, if Natasha used $5,000 to pay for certification, Natasha
still have $70,000 to be added to the PV of future salaries. NPV=$1,426,696.97+$70000=$1,496,696.97
4.) The answer is Option 3: Attaining an MBA: Under this option Natasha will earn $20,000 more than her current pay and the salary will increase by 3% a year. But the MBA program will cost $25,000 a year and the program will last for 3 years. The pay differential will take effect upon completion of the MBA, thus after 3 years, effectively at the end of year 4. To evaluate the Natasha’s fortune under this option, we need to compute the PV of Natasha expected salaries or cash flows. We also need to find the PV of the cost of the MBA program as costs are paid at the beginning of each of the 3 years. Then we need to find the NPV = PV of expected salaries – PV of cost of MBA. PV of expected salaries or future cash flows under this option: PV=$1,642,162.60

PV of cost of MBA=$72,349.03

NPV = PV of expected salaries – PV of cost of MBA
= $1,642,162.60 – $72,349.03
= $1,569,813.57


Related Topics

We can write a custom essay

According to Your Specific Requirements

Order an essay
Materials Daily
100,000+ Subjects
2000+ Topics
Free Plagiarism
All Materials
are Cataloged Well

Sorry, but copying text is forbidden on this website. If you need this or any other sample, we can send it to you via email.

By clicking "SEND", you agree to our terms of service and privacy policy. We'll occasionally send you account related and promo emails.
Sorry, but only registered users have full access

How about getting this access

Your Answer Is Very Helpful For Us
Thank You A Lot!


Emma Taylor


Hi there!
Would you like to get such a paper?
How about getting a customized one?

Can't find What you were Looking for?

Get access to our huge, continuously updated knowledge base

The next update will be in:
14 : 59 : 59