Financial Analysis of Ben Bates' MBA Program Decision

Factors Affecting Ben's MBA Decision

Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job. his nu/ is to become an imemment bunker. He fats that an MBA degree would allow him to achieve this goal. After examining schools. he has narnnwed his choice to either Wilson Univenny or Mount Perry College. Although internships are encouraged by bah ultooh. to get clamcredit for the internship. no stray can be paid. Other than internships. neither school will allow its students to work while enrolled in its MBA program. Ben currently works at the money management fum Dewey and Louis. His annual salary at the Arm is 365.060 per year, and his salary Is expected to increase at ) percent per )ear until retirement. He is currently 18 years old and expects to work for 40 more years. His current job includes a fully paid health insurance plan. and his current mane Lax rate is 26 percent. Ben has a sintngs account with enough money to cover the entire cost of his MBA program. The Ritter College of Business at Wihon University as one of the top MBA programs in the country. The MBA degree reaulres Ow yews of full-time enrollment at the university. The annual tuition is 310.000. payable at the beginning of each school war. Books and other supplies are estimated to cost 13.000 per year. Ben expects that after graduation (torn Wilton. he will recent a job offer for about 1110.000 per )car. with a 320.000 signing bonus. The salary at thisjob will increase at a percent per war. Because of the higher salary. his average income us rate will increase to 31 percent. The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is The Bradley School of Business at Mount Petry College began its MBA program 16 )ears ago. the Stadia School is smaller and less well known than the Ritta College. Bradley offers an accelerated. eneyear program. with a tuition coat of 165.000 to be paid upon Malriallatioe. Books and other supplies for the program art expected to cost 34.500. Ben thinks that he will receive an offer of 392000 per mar upon graduation. with an $18.000 signing bonus. The salary at this job will increase at 3.5 percent per nat. His average tax rate aunts level of income will be 29 percent. Born schools offer a health insurance plan that will cost 33.000 per year, payable at the beginning of the year. Ben also estimates that morn and board expenses will cost 52.000 more per year at both schools than his current expenses. payable at the be inning of each year. The appropriate discount rate as 4.7 percent.

1. How does Ben's age affect his decision to ga an MBA?

2. What other. perhaps AOntillaillIMINC, factors affect Ben's decision to get an MBA?

3. Assuming all salaries are paid at the end of each year. what is the best Dalian for Ben from a strictly financial standpoint?

4. Ben believes that the appropriate analysis is to calculate the future salue of each option. How would you em/uate this statement?

5. What initial salary would Ben need to recent to make him indifferent between attending Wilton University and Haying in his current position?

6. Suppose. instead of being able to pay cash for his MBA. Ben mint borrow the money. The current borrowing rate is 4.3 percent. Flow would this affect his decision?