Ben Gates graduated from college six years ago with a finance undergraduate degree. Since Graduation he has been employed in the finance department at East Coast Yachts. Although he is satisfied with his current job his goal I to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools he has narrowed his choice to either Wilton University or Mount Perry College. Although internships are encouraged by both schools to get class credit for the internship no salary can be paid. Other than internships neither school allow itsThe MBA Decision students to work while enrolled in its MBA program. Ben?s annual salary at East Coast Yachts is $53000 per year and his salary is expected to increase at 3% per year until retirement. He is currently 28 years old and expects to work for 40 more years. His current job includes a fully paid health insurance plan and his current average tax rate is 26%. Ben has a savings account with enough money to cover the entire cost of his MBA program. The Ritter College of Business at Wilton University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $580 payable at the beginning of each school year. Books and other supplies are estimated to cost $2500 per year. Ben expects that after graduation from Wilton he will receive a job offer for about $100000 per year with a $15000 signing bonus. The salary at this job will increase at 4% per year. Because of the higher salary his average income tax rate will increase to 31%. The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than the Ritter College. Bradley offers and accelerated one-year program with a tuition costs of $71000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $3500. Ben thinks that after graduation from Mount Perry he will receive an offer of $88000 per year with a $12000 signing bonus. The salary at this jobs will increase at 3.5% per year. His average income tax rate at this level of income is 29%. Both schools offer a health insurance plan that will cost $3000 per year payable at the beginning of the year. Ben also estimates that room and board expenses will cost $2000 more per year at both schools than his current expenses payable at the beginning of each year. The appropriate discount rate is 6.5%. Assume all salaries are paid and the end of the year.1. How does Ben?s age affect his decision to get an MBA? As the following calculations show Ben should begin his MBA as soon as possible since waiting more years yields a lower present value for his expected salary and costs. If he waits till he turns 38 then the Wilton University option is no longer financially viable same with the Mount Perry option if he waits till 41.”
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