Questionnaire Pertaining to MBA and Finance

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

Ben is now 28 years old and he graduated from college six years ago when he’s age is 22 years old. if we Assuming that Ben already working for about 5 years since graduated from college, he would have enough money from salary saving in 5 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? If Ben is married and he has children that will effect his dissition to get MBA. another thing is the willingness is a big cause can effect Ben’s disstion if he has willingness to studying.

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

Getting the MBA at Wilton University
A. PV of salary for 38 years (40 – 2 years)
B. PV of signing bonus

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

4. Ben believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement Getting the MBA at Wilton University
In this case, must compute 4 parts:
A. FV of salary for 38 years (40 – 2 years)
B. FV of signing bonus

A. FV 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
G (growth rate) = 4%
T (the number of period working) = 38
So the FV is = $ 336,905.94

B. FV of signing bonus
The factors to consider are:
Signing bonus = $ 20,000
G (growth rate) = 0 %
T (the number of period working) = 38
So the FV is = $ 20,000

5. What initial salary would Ben need to receive to make him indifferent between attending Wilton University and staying in his current position? Staying in his current position, PV 1 = $935,283.49

Getting the MBA at Wilton University, PV2 = $ 1,804,927.68

When PV1=PV2
21,06C1 = $75,900 * 23,78
21, 06 C1 = $ 1,804,927.68
C1 = $85,683.96

The amount $ 85,683.96 already deducted with 26% taxed, the salary before tax deduction is $ 107,961.78. So, the initial salary would Ben need to receive to make him indifferent between attending Wilton University and Staying in his current position is $107,961.78

6. Suppose, instead of being able to pay cash for his MBA, Ben must borrow the money. The current borrowing rate is 5.4%. How would this affect his decision? Getting the MBA from Wilton University

Ben Bates must borrow $146,000 to get the MBA at the Wilton University for two years. The current borrowing rate is 5, 4%. Assuming he pay out the principal plus interest every year for five years:

Loan amount : $146,000
Interest rate : 5, 4%
Long term : 5
Loan payment : $ 34.096,06

The total payment in five years is $170.580,30. Then, when we calculated the present value with discount rate 6,5% and period five years: C = $170.580,30
R (discount rate) = 6, 5%
T (the number of period) = 5
So the PV is = $ 708,875.80