Ben Bates

Topics: Time value of money, Present value, Time Pages: 2 (650 words) Published: June 20, 2011
| Working| Wilton| Mount Perry|
Annual Salary| 55,000| 98,000| 81,000|
Expected increase| 3%| 4%| 3.50%|
Work (years)| 38| 36| 37|
Tax rates| 26%| 31%| 29%|
Annual tuition| | $63,000 | $80,000 |
Books and other supplies (annual)| | $2,500 | 3,500|
Programs (year)| | 2| 1|
Signing bonus| | 15,000| 10,000|
Health insurance (annual)| | $3,000 | 3,000|
Room and board (annual)| | $20,000 | $20,000 |

1. How does Ben's age affect his decision to get an MBA?
Ben's age will affect his decision to get an MBA in the sense that the earlier he gets an MBA the better off he will be. Being currently 28 years old, and he has been working for six years already MBA normally takes about 2 years he will be in his early 30s. If he waits till he is 35 years old to get an MBA, it might be harder due to the fact that he has been out of school for so long he may have forgotten information. Looking at this from a time value point of view Ben’s age is the deciding factor if he should go continue his MBA or not.

2. What other, perhaps non-quantifiable factors, affect Ben's decision to get an MBA? -Relationship of MBA performance as measured by grades with the expected salary after graduation -Another would be the possible employers after MBA. It could be that Ben is not a good fit with their organizational cultures. -Job achievement, the opportunity to work in the investment banks, the pride for working as an investment banker, and the pride for having a higher level of degree than before.

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

Current Job = $838,463.07
Wilton = $1,551,097.23
Mount Perry = $788,690.76

Wilton would be best option for Ben

See Spreadsheet for calculations

4. Ben believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate...
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