Question

Objective:
Currently-employed retail customer service representative seeks employer’s approval to obtain a Customer Service Specialist certification from Action Systems, Inc. by completing an intensive sales and customer relations program over the next three months on a full-time basis. Please answer the questions below and show your work.

What is the Net Present Value to the company of sponsoring the professional in obtaining this license based on the assumptions below?

Does the Net Present Value support the decision to put the employee into this program? Please put an X next to the right answer.
YES _________ NO _________

ASSUMPTIONS

Direct costs
Tuition, fees, materials and two weekend conferences totaling $18,500

Indirect costs
Lost earnings while participating in program totaling $33,000

Interest rate
2%

Expected increased productivity (from sales and improved service) upon completion of program
Period (Year) 1 - $11,000
Period (Year) 2 - $14,000
Period (Year) 3 - $16,000
Period (Year) 4 - $15,000

Answer 1

Net Present Value to the company of sponsoring the professional in obtaining this license

The initial cost outflow upon taking the course =18500$+33000$=51500$

year	Cash inflow (A)	Present value (B)	Discounted Cash flow(A*B)
1	11000	1/(1.02)^1=0.9803921	10784.31
2	14000	1/(1.02)^2=0.961168	13456.36
3	16000	1/(1.02)^3=0.94232233	15077.16
4	15000	1/(1.02)^4=0.923845	13857.68
			53175.52

Net Present Value to the company= discounted cash inflow- initial cost=53175.52$-51500$=1675.515$

Since the Net Present Value to the company is positive i.e. it is greater than the initial cost outflow so sponsoring the professional in obtaining this license is beneficial

So the Net Present Value support the decision to put the employee into this program. YES