Brian received an undergraduate degree in finance four years ago and has been employed all this time at a mid-size wealth management company. His initial salary was $65,000 per year and increased 4.0% every year. Brian decided that his four-year stint at this employer has prepared him well for an MBA degree. He applied to several schools and was accepted by one of the top- 10 programs in the county. Brian notified his manager about his decision yesterday, but today the manager made him the following offer: Brian will be assigned to lead a very important project with immediate salary increase of 10%. The manager assured him that for the following four years his annual raise will be at least 5%. Brian is planning to make his decision (quit and go to school or stay and lead the project) based on the present value of future earnings in the next 20 years (ignore taxes). He plans to stop working in exactly 20 years regardless of his decision and become a gentleman farmer.

1. Build a spreadsheet with Brians cash flows for the next 20 years and calculate present value of future earnings for two scenarios: (1) stay and lead the project and (2) enroll into MBA program; assume the following: Brian estimates that the two-year MBA program will cost $100,000 per year in tuition and other expenses; his starting salary after MBA is expected to be $130,000 and will grow 3.0% per year, the same growth rate that Brian expects his salary will grow at his current employer after the 5% raises are over. Brian thinks that the appropriate discount rate is equal to 10-yr Treasury rate on March 1, 2017 + 4.00% (from Section II). What scenario should Brian pick?

2. What should the immediate adjustment (in %) to his current salary be to make Brian indifferent between two scenarios? (Hint: use solver function in Excel)