Current Position

Age
Work Life

Current Position

28
35
Signing
Bonus

Salary

Ritter College
Bradley School

50,000

95,000
78,000

15,000
10,000

preset value
of salary
Current Position
Ritter School
Bradley School

728896
1424720
1147258

728896
1256117
1,077,237

present
value of
salary
Including
Bonus

present value of
bonus

728,896
8,568 1,264,686
6,260 1,083,497

present value of
bonus if no tax is paid
on bonus and is paid
on date of joining

Current Position
Ritter School
Bradley School

728896
1424720
1147258

age

728896
1256117
1,077,237

13225 1269342
9390 1,086,627

51 in case of ritter school and 53 in case of bradley

The MBA Decision

by replacing 95,0
with 65110
, this value becom
equal to E12
Hike

Tax Rate
3%

4%
3.50%

Less Edu
Exp.

e of bradley

Health
Money in
Insurance Hand

included
in salary
31%
do
29%
do
26%

Net
Present
Value

future
value
0 728,896 6605443
165,782 1,098,904 9958547
101,500 981,997 8899109

165,782
101,500

728896 6605443
1103561 10000747
985,127 8927473

37,000
65,550
55,380

Educatoin Expenses
Course
Duration

Tution
Books & Health
Fees
Supp.
Insur.
2 120,000
5,000
6,000
1
75,000
3,500
3,000

minimum return

by replacing 95,000
with 65110
, this value becomes
equal to E12
Educatoin Expenses
Remainin
Board & Discount
Total
Present Value g Work
Lodge
Rate
Life
40,000
6.50% 171,000
165,782
33
20,000
6.50% 101,500
101,500
34

Current Position
Age
Work Life

28
35

Position
Current Position

Salary
50,000

Witon- Ritter College 95,000

Bradley School
78,000

Signing Bonus
0
3%
15,000
10,000

Salary hike

4%
3.50%

Tax Rate
26%
31%
29%

Assuming salary paid at end of each period and

Position
Salary
Current Position
728896
Witon- Ritter School 1424720
Bradley School
1147258
Current Position
728896
Witon- Ritter School 1424720
Bradley School
1147258

present
value of
salary
preset value
Including
of salary
present value of bonus
Bonus
728896
728,896
1256117
8,568
1,264,686
1,077,237
6,260
1,083,497
Assuming salary paid at end of each period and N
728896
1256117
13225
1269342
1,077,237
9390
1,086,627

ANSWER
1
As the Ben's
age increases, the NPV of the options available will decrease and the money e
return @ 6.5%. So, as the age of Ben's increases the financial feasibility of doing MBA will
school and 53 in case of bradley.

ANSWER 2:
The
other
non-quantifiable
are:1)
The
inflation
and market factors
trend can
change the interest rate, which can change the viabi
calculation. Such as may be the interest rate slash down or may be the discounting rate w
higher percentage.
2) The uncertainity of getting the job in expected company or eill get less salary as expect

ANSWER 5:
Annuity factor for present position

19.7

Salary (after tax) Ben needs to receive now to be indifferent to

attending Wilson

###

The MBA Decision

Education Expenses
Health
Insurance Money in Hand
Books &
Health
included?
(minus tax)
Course Duration Tution Fees
Supp.
Insur.
yes
37,000
NA
NA
NA
NA
yes
yes

65,550
55,380

2
1

120,000
75,000

5,000
3,500

6,000
3,000

nd of each period and tax paid on bonus

Less Edu
Exp.

Net Present
Value
future value
0
728,896
6605443.407562
165,782
1,098,904
9958547.38655
101,500
981,997
8899109.120163
of each period and NO tax paid on bonus
728,896.23
6,605,443.41
165,782
###
10,000,747.15
101,500
985,127
8927472.985162

ease and the money earned in that period will give him good
ty of doing MBA will decreases. 51 in case of Witon- Ritter

can change the viability of the

e discounting rate will increase to

less salary as expected.

Calculated using annuity growth formula

Q3 and Q4 - Assuming
salaries are paid at end
year, Ritter works as the
option.

Education Expenses
Board &
Discount
Lodge
Rate
NA
NA
40,000
20,000

6.50%
6.50%

Q3 and Q4 - Assuming all

salaries are paid at end of
ear, Ritter works as the best
option.

Total

171,000
101,500

Present
Value Education Remaining
expense Work Life

165,782
101,500

33
34

Question 6
The MBA Decision
Current Position
Age
28
Work Life
35

Position

Salary

Signing
Bonus

Hike

Tax Rate

Health
Money in
Insurance Hand

Current Position 50,000

3%

26%

included in
salary
37,000

Ritter College

95,000

15,000

4%

31%

do

65,550

Bradley School

78,000

10,000

3.50%

29%

do

55,380

PV of
salary

total
interest
paid on
loan

present
value of
education
loan

Current Position 728896.23

Ritter School
1424720 1256117

present
value of
present salary
value of Including
bonus
Bonus
728,896
8568.2381 1,264,686

14,100

163,195

Bradley School

6259.7809 1,083,497 5,481

1147258

1077237

100,452

Education Expense
Course
Tution
Duration Fees

Books &
Supp.

Health
Insur.

Board &
Lodge

Discount
Rate
Total

120,000

5,000

6,000

40,000

6.50%

171,000

75,000

3,500

3,000

20,000

6.50%

101,500

net
present
value
Net
after
Less Edu Present payin
Exp.
Value
interest
0
728,896
728,896
165,782
1,098,904 935,709
101,500

981,997

881,546

Present
Value

Remainin
g Work
interest
Life
rate

165,782

33

5.4%

101,500

34

5.4%