MBA Decision Case

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%

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Current Position

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

The MBA Decision

Witon- Ritter College 95,000

Assuming salary paid at end of each period and

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

The MBA Decision

nd of each period and tax paid on bonus

can change the viability of the

less salary as expected.

Calculated using annuity growth formula

Q3 and Q4 - Assuming all

Current Position 50,000

Current Position 728896.23

6259.7809 1,083,497 5,481

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