Before beginning the discussion, go to www.asimplemodel.com On the top bar, click on MODELS.
Watch the video, which will guide you in developing your own Discounted Cash Flow Analysis.
Instead of pretending that we are going to buy a boat to rent out until we retire, assume that we are
estimating the Cash Flow for tuition from the TAMUC MBA program. [note: you are not expected to do
any extensive research on ACTUAL revenue or expenditures of TAMUC – I just picked something familiar
to you so that you could make easy assumptions, but with enough familiarity to do some “active
learning.” Again, the TAMUC is just for a more realistic context than a retirement-sale boat – don’t spend
your time researching actual revenue and expenses. – ask me if this is confusing.
I like this site because he shares LOTS of cool Excel tricks that will make you seem like a super groovy
individual to whomever hires you. This will cause your new boss to rapidly promote you to a position of
wealth and prominence. Then you will come back and donate lots of money to your alma mater. In fact,
you will probably set up a scholarship in my honor just because I showed you this cool website.
The discussion is going to center around the following questions and modifications to the model:
1. What cost of capital are you using? Why did you choose this cost of capital? Is this a realistic
assumption? (how does the present value of future revenue change when you raise or lower the cost of
capital? – under what scenarios would you argue for this to be higher/lower?)
2. The model assumes a steady revenue stream. Is this a reasonable assumption for revenue from college tuition? How much risk do you think the University faces related to changes in demand for enrollment in
the MBA program? (this is not a math question and there is not a numerical solution as asked,
but your understanding of the concept of risk, along with your current role as a “consumer”
should inform this discussion) If you were actually employed to forecast tuition revenue, what macroeconomic events would
you be concerned might increase variance in the revenue stream from future enrollment?
3. Consider the elasticity of college tuition, specifically the tuition at TAMUC. What types of things affect
the elasticity of demand for graduate tuition for our MBA program? How does this affect pricing
considerations?
Submit your Excel Model in the dropbox for discussion 1. The discussion should be DISCUSSION. I hope
this will be an interesting space that allows for getting to know each other a bit, learning from each
other, and stimulating more thought than an individual post is capable of provoking. I find posts that say, “I agree” and nothing else to be a waste of all of our time. Each post should
make substantive contributions. The purpose is not to research actual figures, but you will be graded based on how well you
demonstrate your understand the topics we are studying. For example, you don’t even have to
know the price of tuition to be able to discuss how recession affects the demand for enrollment. This is not a research assignment, but you are always welcome/encouraged to google stuff to
improve your discussion. I would expect many of you to need to do a quick search for
“determining the cost of capital.” We are living in the “information age,” but the skill of sorting
through information and to make decisions is a valuable skill and should be practiced.

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