Mini Case

Topics: Time value of money, Future value, Master of Business Administration Pages: 5 (1464 words) Published: June 1, 2012
Mini Mini Case, page 145:

1. How does Ben´s age affect his decision to get an MBA ?

Ben’s age has a big impact on his decision to get an MBA. He already worked about 5 years at Dewey and Leweys and he earns the complete salary as an employee. Now it is up to him whether to invest in a higher degree in order to earn more money in the future or to keep his current job and invest his money in other things. It can be a hard decision for a person who already worked 5 years because in these one or two years of education he does not earn any money but he has to pay for his education.

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

From a strictly financial point of view the best choice for Ben would be to go to Bradley school. Investing in the MBA degree is sooner paid off by the higher salary he earns at his job. Thus the present value of money will be higher compared to the other two options.

PV D&L : € 234.366,96
PV Wilton: € 222.216,09
PV Bradley: € 272.198,93

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

When Ben calculates the future value of each option he does not consider the return on investment. If he based his choice explicitly on the future value, Wilton University would be the best option. But taking also ROI into account Bradley school would be more appropriate because it has a higher present value and the costs of investment are sooner covered.

Year| Dewey & Lewis| | Taxes| | Net income|
1| 75.000,00 € | | 26.250,00 € | | 48.750,00 € | 2| 77.250,00 € | | 27.037,50 € | | 50.212,50 € | 3| 79.567,50 € | | 27.848,63 € | | 51.718,88 € | 4| 81.954,53 € | | 28.684,08 € | | 53.270,44 € | 5| 84.413,16 € | | 29.544,61 € | | 54.868,55 € | 6| 86.945,56 € | | 30.430,94 € | | 56.514,61 € | 7| 89.553,92 € | | 31.343,87 € | | 58.210,05 € | 8| 92.240,54 € | | 32.284,19 € | | 59.956,35 € | 9| 95.007,76 € | | 33.252,71 € | | 61.755,04 € | 10| 97.857,99 € | | 34.250,30 € | | 63.607,69 € | 11| 100.793,73 € | | 35.277,80 € | | 65.515,92 € | 12| 103.817,54 € | | 36.336,14 € | | 67.481,40 € | 13| 106.932,07 € | | 37.426,22 € | | 69.505,84 € | 14| 110.140,03 € | | 38.549,01 € | | 71.591,02 € | 15| 113.444,23 € | | 39.705,48 € | | 73.738,75 € | 16| 116.847,56 € | | 40.896,64 € | | 75.950,91 € | 17| 120.352,98 € | | 42.123,54 € | | 78.229,44 € | 18| 123.963,57 € | | 43.387,25 € | | 80.576,32 € | 19| 127.682,48 € | | 44.688,87 € | | 82.993,61 € | 20| 131.512,95 € | | 46.029,53 € | | 85.483,42 € | 21| 135.458,34 € | | 47.410,42 € | | 88.047,92 € | 22| 139.522,09 € | | 48.832,73 € | | 90.689,36 € | 23| 143.707,76 € | | 50.297,71 € | | 93.410,04 € | 24| 148.018,99 € | | 51.806,65 € | | 96.212,34 € | 25| 152.459,56 € | | 53.360,85 € | | 99.098,71 € | 26| 157.033,34 € | | 54.961,67 € | | 102.071,67 € | 27| 161.744,35 € | | 56.610,52 € | | 105.133,82 € | 28| 166.596,68 € | | 58.308,84 € | | 108.287,84 € | 29| 171.594,58 € | | 60.058,10 € | | 111.536,47 € | 30| 176.742,41 € | | 61.859,84 € | | 114.882,57 € | 31| 182.044,69 € | | 63.715,64 € | | 118.329,05 € | 32| 187.506,03 € | | 65.627,11 € | | 121.878,92 € |...
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