Finance question: The MBA Decision.

• Mount Perry MBA (One year program)

• Calculate costs: Total direct costs: Tuition + books and supplies + health insurance minussavings on room & board. Since it is a one year program, the PV is the same as the total costs.
• Calculate After tax bonus (tax rate is 29%) paid in One year.
• Calculate After tax Salary: Salary will grow at 3.5% per year. You must also remember that Ben will now only work for 37 years, so the present value of his after tax salary is:

PV = C { 1 – [(1+ g ) / (1 + r)] t }C= After tax salary, g= 3.5%, r = 5.55, t = 37 years ( r – g )

Since the first salary payment will be received in 2 years from today, you need to discount this (the above PV) for one year, or in another word divide the above PV by (1.055) to find the value today.

So the total value of a Mount Perry MBA is: PV salary + PV Bonus – Costs

NOW compare the three Values to make decision. The highest value the best choice