The Mba Decision

Topics: Present value, Net present value, Mathematical finance Pages: 6 (1538 words) Published: January 7, 2011
The MBA Decision
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 MBA decision. 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 ramping-up 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 possible. Question 2

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

WorkingWiltonMount Perry
\$ 55,000.00 \$ 100,000.00 \$ 88,000.00
Expected increase3%4%3.50%
Work (years)353334
Tax rates26%31%29%
Annual tuition \$ 65,000.00 \$ 75,000.00
Books and other supplies (annual) \$ 2,500.00 \$ 3,500.00 Programs (year) 21
Signing bonus \$ 20,000.00 \$ 16,000.00
Health insurance (annual) \$ 3,000.00 \$ 3,000.00 Room and board (annual) \$ 2,000.00 \$ 2,000.00
Total cost of MBA:
Year 1 \$ 72,500.00 \$ 83,500.00
Year 2 \$ 72,500.00

Discount rate6.50%6.50%6.50%

Present value of cost of MBA0 \$ 140,575.10 \$ 83,500.00 Present value of signing bonus0 \$ 17,633.19 \$ 15,023.47 Present value of salary \$ 1,053,440.00 \$ 2,093,501.00 \$ 1,764,163.51

Net present value of option \$ 1,053,440.00 \$...

References: Articlebase, Non-Fiction, (2006). What Makes An MBA Degree So Valuable? ArticlesBase SC #30415
http://www.articlesbase.com/non-fiction-articles/what-makes-an-mba-degree-so-valuable-30415.html
O’Connell, Martha, National Public Radio, (2007). How To Choose a College that’s right for you.
http://www.npr.org/templates/story/story.php?storyId=7506102
Ross, S.A., Westerfield, R.W., Jaffe, J.F., Jordan, B.D. (2009). Corporate Finance: Core Principles & Applications, 2nd Edition
Top Universities, Fraternities and Sororities, (2010). The secret history of Greek societies.
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