Harika has just graduated from the University with a BBA and must decide whether to start working now or to get an MBA. In either case, she intends to retire 20 years from today. If she goes to work now, she can expect a salary of INR 5,00,000 per year for each of the next 20 years. An MBA requires an expenditure/fees of INR 6,00,000 per year for each of the next two years, and Harika will start working immediately after getting her MBA. If she gets an MBA, her salary will be a constant INR 10,00,000 per year. Her discount rate for valuing cash flows is 7% per year. Assume that cash inflows (salary amount) occur at the end of the year, while the cash outflows (MBA fees) occur at the beginning of the year. Based on the above, what should be her decision whether to do an MBA or start working now? You can ignore taxes
Harika has just graduated from the University with a BBA and must decide whether to start working now or to get an MBA. In either case, she intends to retire 20 years from today. If she goes to work now, she can expect a salary of INR 5,00,000 per year for each of the next 20 years. An MBA requires an expenditure/fees of INR 6,00,000 per year for each of the next two years, and Harika will start working immediately after getting her MBA. If she gets an MBA, her salary will be a constant INR 10,00,000 per year. Her discount rate for valuing cash flows is 7% per year. Assume that cash inflows (salary amount) occur at the end of the year, while the cash outflows (MBA fees) occur at the beginning of the year. Based on the above, what should be her decision whether to do an MBA or start working now? You can ignore taxes
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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Harika has just graduated from the University with a BBA and must decide whether to start working now or to get an MBA. In either case, she intends to retire 20 years from today. If she goes to work now, she can expect a salary of INR 5,00,000 per year for each of the next 20 years. An MBA requires an expenditure/fees of INR 6,00,000 per year for each of the next two years, and Harika will start working immediately after getting her MBA. If she gets an MBA, her salary will be a constant INR 10,00,000 per year. Her discount rate for valuing cash flows is 7% per year. Assume that cash inflows (salary amount) occur at the end of the year, while the cash outflows (MBA fees) occur at the beginning of the year. Based on the above, what should be her decision whether to do an MBA or start working now? You can ignore taxes
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