ECO 526 – Financial Economics 2
Group 8

The MBA Decision  A Case Study 

Question 1
Ben Bates is 28 years old and expects to work for another 40 years. This tells us that he would retire at the age of 68.
However, if Ben decides to enroll in an MBA program, the following things would happen * He would incur a cost for his higher education
(for two years at Wilton University and for one year at Mount Perry College) * He would not receive a salary during the time that he is enrolled in his MBA program, * He would earn a salary for fewer number of years after completion of the MBA program (for 38 years if he goes to Wilton, or for 39 years if he goes to Mount Perry College) It is these considerations that Ben would need to take into account in making a decision whether to get an MBA degree or not.
Question 2
Other, perhaps nonquantifiable, factors that may affect Ben’s decision to get an MBA are: 1. There is no guarantee of getting the expected amount of salary income per annum after completion of the MBA degree program. 2. The MBA degree may (or may not) be of the exact same monetary value in future. 3. Possible changes in the employment situation within the economy.
Question 3
Assuming all salaries are paid at the end of each year, what is the best option for Ben, from a strictly financial standpoint?
Ben Bates has three alternatives:
* Continue to work at Dewey and Louis until retirement
* Enroll at Ritter College of Business for an MBA program * Enroll at the Bradley School of Business for the MBA program To make a decision purely from a financial standpoint, he must look at the present value of each alternative and choose that alternative, which gives him the highest value. The following information has been given:
Particulars Current Job Ritter College Bradley College Tuition Fee  $65,000.00 $80,000.00
Books and Other Supplies  $3,000.00 $4,500.00
Health...
...The MBADecision
Getting an MBA is one of these decisions that people at one point thought of as a level of education only few are able to attain. In time that perspective has changed and in recent calculations the number of MBA graduates has increased by 250% (Articlesbase, 2006).
In the closing case, we address the questions below to help Ben with his MBAdecision.
Question 1
How does Ben’s age affect his decision to get an MBA?
Time plays a huge factor in Ben’s decision to get his MBA and to be able to make $100,000 a year along with the bonus he will need to start on his MBA as soon he can. We all know that in most cases corporations cannot discriminate against potential candidate’s age, they however, prefers to hire younger candidates over older candidates. By completing his MBA at a young age, he will have the opportunity to get on a path rampingup his income potentially by 4% which should be another incentive for him to capture that at a younger age allowing him to capture the most possible income increase he would have, thereby maximizing his potential income. Waiting would delay possible increases and can possibly reduce his opportunity to be selected for such position. So Ben’s age plays a critical role for Ben and he should start his MBA program as soon as...
...ECO 527 
The MBADecision 
Case 1 
Group 4 



1. How does Ben’s age affect his decision to get an MBA?
We assume that both MBA program start at the beginning of the year, now is the beginning of the year at his age of 28 and he can enroll both program now. The following summary table shows the information he can use to make the decision.
Option  Dewey and Louis  Ritter College ,Wilton Univ (2 year program)  Mount Perry College (1 year program) 
Tuition  /  65000  80000 
Books and other supplies  /  3000  4500 
Health insurance plan  /  3000  3000 
Room and board expenses  /  2000  2000 
Expect salary(annul)  60000  110000  92000 
Growth rate  3%  4%  3.5% 
Bonus (tax free)  /  20000  18000 
Average Tax rate  26%  31%  29% 
Discount rate  6.5%  6.5%  6.5% 
Based on the information above, we can find a timing that gong to the Business School is not a good deal because the net present value of future cash flows would be lower than that of staying at the current job. In addition, we assume Ben will retire at the end of 68 years old; and after T years, it will be worse for Ben to get MBA compared with continuing his current job. We will compare the NPVs of these 3 options at the beginning of (T+1) year so that we can get T.
Option 1: if Ben still working at current job
NPV1=...
...Mini Case  The MBADecision
1. How does Ben’s age affect his decision to get an MBA?
Ben’s age is a very important factor which can affect his decision to get an MBA degree.
Firstly, Ben is now 28 years old and expects to work for 40 more years. So he has an expected work life of 68 years. So the earlier he gets an MBA, the better for him. For example: probably it won’t benefit him much if he decided to get an MBA at the age of 60. No one would hire him as an investment banker even if he had an MBA that time.
Secondly, getting an MBA degree will cost Ben a lot of money. Currently at the age of 28, he already has a job experience of around 6 years. This job allowed Ben to have a savings account with enough money to cover the entire cost of his MBA program. If he wanted to start the MBA at the age of 23, probably he would not have that amount of savings.
Considering these factors, I believe that Ben’s age has an important role to play in his decision to get an MBA.
2. What other, perhaps nonquantifiable factors affect Ben’s decision to get an MBA?
There might be several other nonquantifiable factors that can affect Ben’s decision to get an MBA. For example, neither school will allow its students to...
...does Ben’s age affect his decision to get an MBA?
This document is the property of Management Development Institute, Gurgaon.
Ben passed out from college six years ago with a finance undergraduate degree. He is 28 years of age and his goal I to become an investment banker. Ben’s age can affect his decision to get an MBA due to the following reasons: o His age determines the time period wherein he can be productively employed. The time window available to Ben keeps on reducing with age. o Ben is away from formal mode of study for past six years. Being away from study for many years could cause significant difficulty in adapting to the daunting requirements of a typical MBA program. o The higher earning potential after the MBA program could be exploited more productively and for a longer span of time if Ben completes the MBA program at an early age. o The willingness to confront the academic rigors and challenges, in general, reduces with age. o Given the six years of experience and sufficient financial strength to undergo the program, the time may just be appropriate for Ben to undergo an MBA program for fulfillment of his goal of becoming an investment banker.
2. What other, perhaps nonquantifiable factors affect Ben’s decision to get an MBA? • The quest for learning: The decision of Ben apart from other...
...The MBADecision
Ben Gates graduated from college six years ago with a finance undergraduate degree. Since Graduation,
he has been employed in the finance department at East Coast Yachts. Although he is satisfied with his
current job, his goal I to become an investment banker. He feels that an MBA degree would allow him to
achieve this 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 allow its students to work while
enrolled in its MBA program.
Ben’s annual salary at East Coast Yachts is $53,000 per year, and his salary is expected to
increase at 3% per year until retirement. He is currently 28 years old and expects to work for 40 more
years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26%.
Ben has a savings account with enough money to cover the entire cost of his MBA program.
The Ritter College of Business at Wilton University is one of the top MBA programs in the
country. The MBA degree requires two years of fulltime enrollment at the university. The annual tuition
is $58,000, payable at the beginning of each school year. Books and other supplies are estimated to cost
$2,500 per year. Ben expects that after...
...THE MBADECISION
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...
...3000
Room and Board 0 $2000 $2000
Discount rate 6.5%
1. How does Ben’s age affect his decision to get an MBA?
a. Ben’s current age is a key factor in his decision making process. If he starts a program now, he will be in his early thirties when his finishes, since it usually takes about two years to complete an MBA program. If he begins the program later in his professional career, he might have a harder time with the material. It is more likely that he will have forgotten vital information due to the amount of years out of college. Also, the further he gets in his career before starting, the harder it will be to justify quitting his job to go to college. This is due to the fact that the two colleges that his is considering require its students to not work during the program.
2. What other, perhaps nonquantifiable factors, affect Ben’s decision to get an MBA?
a. It will be equally important for Ben to review nonquantifiable factors than just looking at quantifiable factors. Some of the factors that are nonquantifiable could be:
i. The relationship between grades earned in the MBA program and expected correlated salaries after graduation.
ii. Another would be the possible employers of each particular program. There are employers that may only hire MBAs from particular schools. Based on prior programs, Ben could dig deeper into the hiring...