With the Royal Basketball Clinic under his belt, Ben developed his skills as a point forward over a six-year period of time. Although he is satisfied with his current skills, his goal is to become a professional basketball player. He feels that joining a basketball clinic would allow him to achieve this goal. After examining several basketball clinics, he has narrowed his choice to either Wilton Basketball Clinic or Mount Perry Basketball Clinic. Although internships are encouraged by both clinics, to get class credit for the clinic, no salary can be paid. Other than internships, neither of them will allow its students to work while enrolled in its program. Ben is a second-string forward for the Heat, where he currently plays. It is expected that his salary will increase at a rate of 4.25 percent per year until he retires from the team. His annual salary for the team is 410,000 per year (gross). He is currently 28 years old and expects to play for 40 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Ben has a savings account with enough money to cover the entire cost of his basketball clinic program. Wilton Basketball Clinic is one of the best advanced clinics for point forwards.. The program requires two years of full-time enrollment at the basketball clinic. The annual tuition is $195,000,, payable at the beginning of each school year. Sports equipment, attire, and other necessities are estimated to cost $19,000 per year. Ben expects that after graduation from Wilton, he will receive a basketball contract for about $560,000 per year, with a $120,000 signing bonus. The salary at this job will increase at 3.25% per year. Because of the higher salary, his average income tax rate will increase to 31 percent. Mount Perry Basketball Clinic began its program 16 years ago. The Bradley School is smaller and less well known than the former. It offers an accelerated, one-year program, with a tuition cost of $505,000 to be paid upon matriculation. Sports equipment, attire, and other necessities for the program are expected to cost $25,500. Ben thinks that he will receive an offer of $590,000 per year upon graduation, with an $140,000 signing bonus. The salary at this job will increase at 3.5% per year. His average tax rate at this level of income will be 30 percent. Both clinics offer a health insurance plan that will cost $30,000 per year, payable at the beginning of the year. Ben also estimates that room and board expenses will cost $80,000 more per year at both schools than his current expenses, payable at the beginning of each year. The appropriate discount rate is 6.5 percent. ANSWER ALL THE QUESTIONS BELOW: (Use Time Value of Money calculations) Ben believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement? What initial salary would Ben need to receive to make him indifferent between attending Mount Perry Basketball Clinic and staying in his current position? (Use excel for computation)
With the Royal Basketball Clinic under his belt, Ben developed his skills as a point forward over a six-year period of time. Although he is satisfied with his current skills, his goal is to become a professional basketball player. He feels that joining a basketball clinic would allow him to achieve this goal. After examining several basketball clinics, he has narrowed his choice to either Wilton Basketball Clinic or Mount Perry Basketball Clinic. Although internships are encouraged by both clinics, to get class credit for the clinic, no salary can be paid. Other than internships, neither of them will allow its students to work while enrolled in its program.
Ben is a second-string forward for the Heat, where he currently plays. It is expected that his salary will increase at a rate of 4.25 percent per year until he retires from the team. His annual salary for the team is 410,000 per year (gross). He is currently 28 years old and expects to play for 40 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Ben has a savings account with enough money to cover the entire cost of his basketball clinic program.
Wilton Basketball Clinic is one of the best advanced clinics for point forwards.. The program requires two years of full-time enrollment at the basketball clinic. The annual tuition is $195,000,, payable at the beginning of each school year. Sports equipment, attire, and other necessities are estimated to cost $19,000 per year. Ben expects that after graduation from Wilton, he will receive a basketball contract for about $560,000 per year, with a $120,000 signing bonus. The salary at this job will increase at 3.25% per year. Because of the higher salary, his average income tax rate will increase to 31 percent.
Mount Perry Basketball Clinic began its program 16 years ago. The Bradley School is smaller and less well known than the former. It offers an accelerated, one-year program, with a tuition cost of $505,000 to be paid upon matriculation. Sports equipment, attire, and other necessities for the program are expected to cost $25,500. Ben thinks that he will receive an offer of $590,000 per year upon graduation, with an $140,000 signing bonus. The salary at this job will increase at 3.5% per year. His average tax rate at this level of income will be 30 percent.
Both clinics offer a health insurance plan that will cost $30,000 per year, payable at the beginning of the year. Ben also estimates that room and board expenses will cost $80,000 more per year at both schools than his current expenses, payable at the beginning of each year.
The appropriate discount rate is 6.5 percent.
ANSWER ALL THE QUESTIONS BELOW: (Use
- Ben believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement?
- What initial salary would Ben need to receive to make him indifferent between attending Mount Perry Basketball Clinic and staying in his current position? (Use excel for computation)
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