The MBA decision

Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve his goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program.

Ben currently works at the money management firm of Dewey and Louis. His annual salary at the firm is $60,000 per year, and his salary expected to increase at 3 %*…show more content…*

Second, I think the current family situation. If he married with or without children, this will affect Ben’s decision because spouse or children supporting is also important. The third is his willingness to continue the study. If he eager to continue the study, he will continue the study. But if he has no willingness to study, he could do anything else, for example having jobs that would pay more or open the business.

3. Assuming all salaries are paid at the end of each year, what is the best option for Ben – from a strictly financial standpoint?

I think there are three options have to be calculated:

1. Keeping his current work for 40 years

There are several factors to be considered to calculate the present values (PV) of the first options are: His annual salary at the firm is $60,000 per year, and his salary expected to increase at 3 % per year until retirement, his current average tax rate is 26 % and discount rate is 6.5 percent.

In this case, to get the present value (PV), we can use the formula of growing annuity.

Salary = $60,000, tax rate = 26%, because of tax rate, c = $44,400

R (discount rate) = 6.5%

G (growth rate) = 3%

T (the number of period working) = 40

So the PV is = $935,283.49

2. Getting the MBA at Wilton University

In this case, must compute 4 parts:

A. PV of salary for 38 years (40 – 2 years)

B. PV of signing bonus

C. PV of costs for 2 years (tuition, books

Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve his goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program.

Ben currently works at the money management firm of Dewey and Louis. His annual salary at the firm is $60,000 per year, and his salary expected to increase at 3 %

Second, I think the current family situation. If he married with or without children, this will affect Ben’s decision because spouse or children supporting is also important. The third is his willingness to continue the study. If he eager to continue the study, he will continue the study. But if he has no willingness to study, he could do anything else, for example having jobs that would pay more or open the business.

3. Assuming all salaries are paid at the end of each year, what is the best option for Ben – from a strictly financial standpoint?

I think there are three options have to be calculated:

1. Keeping his current work for 40 years

There are several factors to be considered to calculate the present values (PV) of the first options are: His annual salary at the firm is $60,000 per year, and his salary expected to increase at 3 % per year until retirement, his current average tax rate is 26 % and discount rate is 6.5 percent.

In this case, to get the present value (PV), we can use the formula of growing annuity.

Salary = $60,000, tax rate = 26%, because of tax rate, c = $44,400

R (discount rate) = 6.5%

G (growth rate) = 3%

T (the number of period working) = 40

So the PV is = $935,283.49

2. Getting the MBA at Wilton University

In this case, must compute 4 parts:

A. PV of salary for 38 years (40 – 2 years)

B. PV of signing bonus

C. PV of costs for 2 years (tuition, books

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