A student is trying to determine if an MBA makes sense for his career. He is considering two options for his life. The first option is to attend a school for his MBA for the next three years. The MBA will cost $36, 557.00 per year. After school is over, he will make $82, 513.00 per year. He expects his salary to grow at 5.00% a year for 32.00 years after the MBA. The second option is to stay in his current job. He currently makes $61,069.00 per year. If he does not get an MBA, he expects his salary to grow at 3.00% for the next 35.00 years. The student can earn 9.00% per year on his investments. For simplicity, let's assume all cash flows are at the end of the period (including MBA tuition). What is the present value of the MBA option?
A student is trying to determine if an MBA makes sense for his career. He is considering two options for his life. The first option is to attend a school for his MBA for the next three years. The MBA will cost $36, 557.00 per year. After school is over, he will make $82, 513.00 per year. He expects his salary to grow at 5.00% a year for 32.00 years after the MBA. The second option is to stay in his current job. He currently makes $61,069.00 per year. If he does not get an MBA, he expects his salary to grow at 3.00% for the next 35.00 years. The student can earn 9.00% per year on his investments. For simplicity, let's assume all cash flows are at the end of the period (including MBA tuition). What is the present value of the MBA option?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A student is trying to determine if an MBA makes sense
for his career. He is considering two options for his life.
The first option is to attend a school for his MBA for the
next three years. The MBA will cost $36, 557.00 per year.
After school is over, he will make $82, 513.00 per year.
He expects his salary to grow at 5.00% a year for 32.00
years after the MBA.
The second option is to stay in his current job. He
currently makes $61,069.00 per year. If he does not get
an MBA, he expects his salary to grow at 3.00% for the
next 35.00 years.
The student can earn 9.00% per year on his
investments. For simplicity, let's assume all cash flows
are at the end of the period (including MBA tuition).
What is the present value of the MBA option?
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