1) Alice works in sales but is considering quitting work for 1 year to earn her MBA. Her current job pays $40,000 per year, but with her MBA, she could earn $70,000 per year. Suppose tuition for a MBA is $50,000. Further suppose that Alices discount rate is 5% and she anticipates retiring in exactly 4 years. This means that she will either work in sales for 4 years, or she will quit her job, spend 1 year obtaining her MBA, and work at the higher-paying job for 3 years.

a. What is Alices net present value of a MBA?

b. Will Alice obtain her MBA?

c. Now suppose that Alices current employer has adopted an internal company policy where it will pay 50% of the tuition when an employee pursues a MBA. This means that Alice will only have to pay $25,000 out of her own pocket to obtain her MBA.

d. Now, what is Alices net present value of a MBA?

e. Given the internal company policy, will Alice obtain her MBA?