NPV and IRR

1. (Use Excel) Consider Bob, an 18 year old who is about to embark on a four-year degree program. The tuition for the course is $18,000 per year. Bob currently works at Vons making $16,000 per year and will have to surrender his job to pursue the degree. Based on the BLS Occupational Handbook Bob anticipates his earnings will be $20,000 more each year following graduation (starting in year 5) until he retires after his 30th year of work. For your calculations you can assume all payments and income are received at the end of each year. (8pts)
a. Calculate the net present value of this investment assuming a discount rate at the current 30 year Treasury note rate of ˜ 3.0%.
b. Calculate the internal rate of return from the investment in education.
c. Based on the NPV and IRR, should he undertake the program? Why?
d. Attach Excel spreadsheet with data and results.
2. The numbers in the table below represent values of output (Q), capital (K), labor (L), wage (W), and the rental rate of capital (R) for a business firm over two periods. (6pts)
Period
K
L
W
R
Q
1
30
50
200
100
500
2
40
55
180
90
510
a. Use this information to calculate the wage elasticity of demand coefficient.
b. Assuming the same mathematical relationship exists for capital; calculate a rental elasticity of demand coefficient.
3. Steven Slacker is age 25, has an MBA degree, but is not working. Instead he is living at a major ski area, using the $2,000 per week he gets from his wealthy parents. The parents, however, seeing that Steve is becoming a permanent slacker, decide to end this weekly payment. As a result, Steve chooses to take a job that pays $1,000 per week for 40 hours of work. (3pts)
a. Construct a single income-leisure choice graph to show Steve’s situation before his parents’ decision.
b. Construct a single income-leisure choice graph to show Steve’s situation after his parents’ decision.
c. Summarize the outcome of this change for hours of work, total weekly income, and Steve’s total utility.
4. “The added-worker effect can be explained in terms of the income effect, while the discouraged worker effect is based on the substitution effect.” Do you agree with this statement? Why? (2pts)
5. Go to the Bureau of Labor Statistics website (use attached link) to generate the appropriate data and answer the questions below. Print and attach the appropriate excel tables from the website to support your answers, only attach those with pertinent info to save paper. (6pts)
a. What was the seasonally adjusted Labor Force Participation Rates for men and women (>16) combined in January of 1950 and for January 2015?
b. What was the seasonally adjusted Labor Force Participation Rates for men (>20) in January 1950 and for January 2015?
c. What was the seasonally adjusted Labor Force Participation Rates for women (>20) in January 1950 and for January 2015?
d. What was the seasonally adjusted Labor Force Participation Rates for male and female teenagers combined in January 1950 and for January 2015?
e. List at least 2 possible explanations each a, b, c, & d above?
f. What is the seasonally adjusted Labor Force Participation Rate for each level of educational attainment (< HS, HS, AA, BA) in January 1992 and in January 2015. For each level of educational attainment explain what has happened (increased, decreased, or no change) and give at least one possible explanation why?
6. Go to the Bureau of Labor Statistics Current Employment Statistics website (use attached link) and in sequence select “CES Databases” and “Top Picks” to find info about employment by industry. Print and attach the appropriate tables from the website to support your answers, only attach those with pertinent info to save paper. (10pts)
a. What is the total private and total manufacturing average weekly hours in January 2015?
b. What is the total private and manufacturing average hourly wage in January 2015?
c. What was the employment level for manufacturing and leisure/hospitality in January 1980 and for January 2015? (Use numbers, not words: e.g. 100,000 vs. “one hundred thousand” or “100 thousand”)
d. What is the percentage change in employment for manufacturing and leisure/hospitality over the Jan 1980-Jan 2015 period?
e. Identify at least two possible causes of the difference in employment growth between these sectors.
7. For each of the following visit the corresponding website link and download the appropriate data on educational attainment. Use spreadsheet tables, not graphs in calculating your answers. Print and attach the appropriate tables from the website to support your answers, only attach those with pertinent info to save paper. (15pts)
a. (Census Bureau website Link) What percentage of the population over age 25 in 2014 had a Bachelor’s Degree only and what percentage had a Bachelor’s degree or higher (exclude those that did not complete a degree)?
b. (Census Bureau website Link) In 2014 and 2004 what percent of each demographic (whites, blacks, Asians, and Hispanics) completed a bachelor’s degree or higher? Which group saw the highest percentage change? Write a brief narrative explaining the results.
c. (Site Link) In 2007 what was the median annual earnings of someone over age 25 <HS, AA, BA, and advanced degree? Once you have this data calculate the ratio of earnings (not percent difference) of:
i. HS graduate to <HS
ii. BA graduate to AA graduate
iii. BA graduate to HS graduate
iv. Advanced degree graduate to graduate
v. Write a brief narrative explaining the results of i-iv.
d. (Site Link) Calculate the 2007 ratio of earnings for the BA graduate to HS graduate in each of the following demographic categories then identify the group that has the highest and lowest ratio as well as the percent premium the highest group gets over the lowest group:
i. White
ii. Black
iii. Asian
iv. Hispanic
v. Male
vi. Female
vii. Write a brief narrative explaining the results of i-vi.
e. (Site Link) Using the 2007 educational data by region table, determine the following:
i. % of US graduated from HS or more?
ii. % of US graduated with BA or more?
iii. Which region of the US has the highest and lowest college grad rates (identify region and their percent)?
iv. What are the top and bottom 3 states in terms of HS graduation rates (identify state and percent)?
v. Write a brief narrative explaining the results of i-iv.

28.

What is the common law? Compare and contrast the common law and statutory law, in general terms. Briefly compare town planning legislation with common law action for nuisance, to explain why our planning system is based on statute rather than common law.