58 Appendix 2: Sensitivity analysis Appendices and counts it as part of the opportunity cost of time. As above, the 79% estimate is tested in the sensitivity analysis by changing it to 100% and then to 0%. The changes generate results summarized in Table A2.3, with A defined as the percent of students employed and B defined as the percent that students earn relative to their full earning potential. Base case results appear in the shaded row; here the assumptions remain unchanged, with A equal to 77% and B equal to 79%. Sensitivity analysis results are shown in non-shaded rows. Scenario 1 increases A to 100%while holding B constant, Scenario 2 increases B to 100%while holding A constant, Scenario 3 increases both A and B to 100%, and Scenario 4 decreases both A and B to 0%. Scenario 1: Increasing the percentage of students employed (A) from 77% to 100%, the net present value, internal rate of return, and benefit-cost ratio improve to $28.2 million, 16.4%, and 4.1, respectively, relative to base case results. Improved results are attributable to a lower opportunity cost of time; all students are employed in this case. Scenario 2: Increasing earnings relative to statistical averages (B) from 79% to 100%, the net present value, internal rate of return, and benefit-cost ratio results improve to $28.1 million, 16.1%, and 4.0, respectively, relative to base case results; a strong improvement, again attributable to a lower opportunity cost of time. Scenario 3: Increasing both assumptions A and B to 100% simultaneously, the net present value, internal rate of return, and benefit-cost ratio improve yet further to $29.8 million, 18.8%, and 4.9, respectively, relative to base case results. This scenario assumes that all students are fully employed and earning full salaries (equal to statistical averages) while attending classes. Scenario 4: Finally, decreasing both A and B to 0% reduces the net present value, internal rate of return, and benefit-cost ratio to $22.5 million, 11.2%, and 2.5, respectively, relative to base case results. These results are reflective of an increased opportunity cost; none of the students are employed in this case.46 It is strongly emphasized in this section that base case results are very attractive in that results are all above their threshold levels. As is clearly demonstrated here, results of the first three alternative scenarios appear much more attractive, although 46 Note that reducing the percent of students employed to 0% automatically negates the percent they earn relative to full earning potential, since none of the students receive any earnings in this case. Table A2.3: Business program sensitivity analysis of student employment variables Variations in assumptions Net present value (millions) Internal rate of return Benefit-to-cost ratio Base case: A = 77%, B = 79% $26.9 14.7% 3.5 Scenario 1: A = 100%, B = 79% $28.2 16.4% 4.1 Scenario 2: A = 77%, B = 100% $28.1 16.1% 4.0 Scenario 3: A = 100%, B = 100% $29.8 18.8% 4.9 Scenario 4: A = 0%, B = 0% $22.5 11.2% 2.5 Note: A = percent of students employed; B = percent earned relative to statistical averages
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