Ann is a recent engineering graduate with two years of experience in her current role and is currently looking at getting a Masters degree. She is currently paid $60,000 per year, which she expects to increase at a 4 percent rate until she finally retires. Ann is currently 25 and expects to work for 40 more years. Her current employer offers a benefits package that includes health insurance. Ann has saved enough money to pay for a possible tuition expense and is currently taxed at 23 percent. Ann was accepted at two of the programs she was applying to and is debating whether she should enroll in one of those programs. The details for each of the programs are as follows:

• Program A is a two-year full-time program with annual tuition of $50,000 due at the beginning of each academic year. According to the program's website, books and other required supplies are estimated to cost about $3,000 per year. The school offers a health plan for $5,000 per year.
• Program B is a one-year full-time program with a tuition of $70,000 due at the beginning of the program. Although the supplies were not listed specifically on their information packet, Ann estimates a total cost for supplies and books of around $7,000. The school offers a health plan for $6,000 per year.

Both Programs offer on-campus housing which, according to Ann's estimates, should save her about $5,000 per year. Since both programs are full-time, she will need to leave her current employer if she decides to accept any of the offers.

Ann is anticipating that she will be able to secure a job offer for about $85,000 per year after graduating from program A, with a $7,000 signing bonus. The salary at this job will probably increase at 5 percent per year. Since the pay is much higher than her current income, Ann expects her average tax rate will increase to 30 percent.

For program B, Ann thinks that she will most likely be able to get an offer of $75,000 per year upon graduation, with a $6,000 signing bonus. The salary at this job will increase at 4.75 percent per year and, due to the increased level of income, her average tax rate will be 28 percent. Given the risk of starting a new degree, Ann feels that the appropriate discount rate is 6 percent.

Answer the following:

1A) Although Ann believes she'll be able to get jobs paying the amount stated above for each of the programs, she is trying to understand better how much the initial salary estimate is impacting her decision. Assuming all else equal, what would the initial salaries be for each of the programs so that Ann is financially indifferent between attending that specific program or staying in her current position?

1B) Discuss the impact that initial salary and growth rates have on the analysis.