# The Mba Decision

Pages: 9 (2492 words) Published: March 4, 2013
THE MBA DECISION

1.How does Ben’s age affect his decision to get an MBA?
In our opinion, Age is one of the important factor that affects someone decision to continue study. In this case, Ben is now 28 years old. He graduated from college six years ago when he’s age is 22 years old. Assuming that Ben already working for about 5 years since graduated from college, so that he would have enough money from salary saving in5 years to do his MBA at 28 years age. If he starts the MBA program on 28 years old, he will spend two years for study and perhaps finish his MBA at 30 years old. At 30 years old, he will start working again for 40 more years after getting the MBA. With those reasons, age affects his decision for getting an MBA.

2.What other, perhaps no quantifiable factors affect Ben’s decision to get an MBA? In our opinion is there are several non quantifiable factors affect Ben’s decision to get an MBA. First, we think when assuming that Ben already working for about 5 years since graduated from college. He has job experiences as the MBA program usually put the requirement to the candidates at least having two years experiences in his respective field. Second, we 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 stand point? We 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 and supplies, health insurance and rent fee)  D. PV of 2 years salary when he would work at the money management firm.

A. PV of salary for 38 years
The factors to consider are: He will receive a job offer for about \$110,000 per year, with a \$20,000 signing bonus. The salary at this job will increase at 4% per year. Because of the higher salary, his average income tax rate will increase to 31%. Salary = \$110,000, tax rate = 31%, so, C = \$75,900

R (discount rate) = 6.5%
G (growth rate) = 4%
T (the number of period working) = 38
So the PV is = \$ 1,804,927.68

B. PV of signing bonus
The factors to consider are:
Signing bonus = \$20,000
R (discount rate) = 6.5%
T (the number of period working) = 38
So the PV is = \$279,584.20

C. PV of cost for years ((tuition, books and supplies, health insurance and rent fee) The factors to consider are: tuition \$65,000, Books and other supplies are estimated to cost \$3,000 per year. Health insurance plan that will cost \$3,000 per year, room and board expenses will cost \$2,000. Cost = \$73,000 * 2 years= \$146,000

R (discount rate) = 6.5%
T (the number of period studying) = 2
So the PV is = \$265,811.46

D. PV of 2 years salary when he would work at the money management firm. The factors to consider are: His annual salary at the firm is \$60,000...