1. How does Lexy’s age affect her decision to get an
MBA?
Given data |
||||
S.# |
Particulars |
|||
Lexy present age |
26 years |
|||
Retirement age |
56 years |
|||
Balance |
30 years |
|||
3 options |
||||
staying in current job |
||||
getting MBA from an Arrington university |
||||
getting an MBA from boyden college |
||||
PV of Option 1 |
||||
Salary |
$70,000 |
|||
Tax amount @ 22% |
$15,400 |
|||
After tax salary |
$54,600 |
|||
Growth rate |
3.50% |
|||
No of periods |
30 years |
|||
Present value of remaining at current job |
$1,006,946 |
|||
Arrington MBA |
||||
Year 0 |
Year 1 |
|||
Tuition Fee |
-$60,000.00 |
-$60,000.00 |
||
Moving expenses |
-$2,000.00 |
|||
Books and other supplies |
-$3,000.00 |
-$3,000.00 |
||
Health Insurance |
-$6,000.00 |
-$6,000.00 |
||
Extra Room and Board expenses |
-$5,000.00 |
-$5,000.00 |
||
Total Direct costs(cash outflow) |
-$76,000.00 |
-$74,000.00 |
||
Present value factor @ 7.1% |
$1.00 |
$0.93 |
||
Present value of direct costs |
-$76,000.00 |
-$69,094.30 |
||
Year 3 |
||||
Signing Bonus |
$20,000 |
|||
Tax amount @ 30% |
$6,000 |
|||
$14,000 |
||||
Present value factor @7.1% |
0.81 |
|||
Present value of signing Bonus |
$11,396 |
|||
Year 3- Year 30 |
||||
Salary |
$100,000 |
|||
Tax amount @ 30% |
$30,000 |
|||
After tax salary |
$70,000 |
|||
Growth rate |
4.50% |
|||
No of periods |
28 years |
|||
Present value of remaining at current job |
$1,167,680 |
|||
Value of Arrington MBA |
$1,033,982 |
|||
Conclusion:- |
||||
Present value of cash inflows by choosing Arrington MBA is more than remaining at current job. |
||||
So if Lexy age has been much more than 26 years or retirement period |
||||
was lesser than 30 years, then being at current job is better than choosing MBA |
||||
If Lexy should have joined MBA much before than 26 years then going for MBA is better. |
||||
Note:- |
||||
Year 0- Starting of the year |
||||
Year 1- ending of the 1st year |
THE MBA DECISION Lexy Halliday graduated four years ago with degrees in accounting and finance. She has been employed in the finance department at Thorvaldsen Conglomerated (TC) since graduation. She is satisfied with her current job, but is considering an MBA degree to increase her skills and her advancement prospects. She has examined a number of MBA schools. She has narrowed her choices to 1) staying in her current job, 2) getting an MBA at Arrington University (AU) or 3)...
please show work The MBA Decision Case Information #1 #2 #3 #4 Timeline for Growing Annuity THE MBA DECISION Lexy Halliday graduated four years ago with degrees in accounting and finance. She has been employed in the finance department at Thorvaldsen Conglomerated (TC) since graduation. She is satisfied with her current job, but is considering an MBA degree to increase her skills and her advancement prospects. She has examined a number of MBA schools. She has narrowed her choices to...
Please show all work. Thank you I greatly appreciate your help! 4 Lexy Halliday graduated four years ago with degrees in accounting and finance. She has been employed in the finance 5 department at Thorvaldsen Conglomerated (TC) since graduation. She is satisfied with her current job, but is 5considering an MBA degree to increase her skills and her advancement prospects. She has examined a number of MBA schools. She has narrowed her choices to 1) staying in her current job,...
Question6. suppose, instead of being able to pay cash for his MBA, Ben must borrow the money. The current borrowing rate is 5.4 percent. How would this affect his decision? THE MBA DECISION Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has...
Kelly is contemplating on returning to graduate school to earn her MBA. She knows from experience, that she can get a well paying job after undergraduate school. The probability of getting a job with a salary of $20,000/year is 75% and a job with a salary of $30,000/year is 25%. However, if she chooses to attend and finish graduate school, her salary would likely increase. The probability of getting a job with a salary of $40,000/year is 75% and getting...
Adina, age 32, is a married architect with one child. Her salary has reached a plateau at $85,000 a year. She believes that if she pursues an MBA degree full-time, she would move into a managerial position and her salary would rise by $60,000 a year. Adina wants to maintain her current lifestyle, which already generates substantial yearly cash savings and accumulate the capital to leave to her son. Her MBA course would take two years to complete and cost...
Adina, age 32, is a married architect with one child. Her salary has reached a plateau at $85,000 a year. She believes that if she pursues an MBA degree full-time, she would move into a managerial position and her salary would rise by $60,000 a year. Adina wants to maintain her current lifestyle, which already generates substantial yearly cash savings and accumulate the capital to leave to her son. Her MBA course would take two years to complete and cost...
Ben Bates 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 is 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...
A prospective MBA student earns $45,000 per year in her current job and expects that amount to increase by 12% per year. She is considering leaving her job to attend business school for two years at a cost of $40,000 per year. She has been told that her starting salary after business school is likely to be $125,000 and that amount will increase by 16% per year. Consider a time horizon of 10 years, use a discount rate of 12%,...
A prospective MBA student earns $60,000 per year in her current job and expects that amount to increase by 14% per year. She is considering leaving her job to attend business school for two years at a cost of $40,000 per year. She has been told that her starting salary after business school is likely to be $80,000 and that amount will increase by 14% per year. Consider a time horizon of 10 years, use a discount rate of 9%,...