1) Should Janet get an MBA?

Since graduating, Janet has been working at a prestigious consulting company as an entry-level analyst with earnings of exactly $100,000 (let's say this includes benefits, bonuses, and is net of current cost of living). Janet has reached a point where she will not advance any further in the company without an MBA. Suppose for simplicity that without an MBA, she will earn $100,000 over the course of the next forty years until retiring at age 65.

If she does choose to get an MBA, it will take her 2 years to earn the MBA, and her salary will be increased to $150,000 when she returns to the company. She has an offer from Columbia Business School in New York, where tuition and a high cost of living will cost roughly $100,000 per year. She cannot work while attending business school. Suppose that Janet will be able to take out an interest-free loan (or equivalently, that she is able to pay fully out of pocket).

1. Draw a graph plotting the annual amount of money Janet will make over the next 40 years if she 1) accepts the MBA offer, and 2) declines the MBA offer. The graph does not have to be drawn exactly to scale but should capture the relative magnitudes (i.e. don't spend too much time making everything line up).

1. What is the opportunity cost of getting an MBA?

1. Draw a second graph illustrating cumulative earnings over time for each path.

1. Calculate how much more (or less) Janet will earn by getting an MBA.

1. Janet can get an MBA at any age. Calculate the age at which it would no longer be worth it.