Question
David Tenant, age 26, is considering joining the prestigious MS. Finance Program at a School of Business in fall of 2022. He is trying to
David Tenant, age 26, is considering joining the prestigious MS. Finance Program at a School of Business in fall of 2022. He is trying to figure out if the program is worth the investment -- at least in financial terms. He figures that he will have to pay $50,000 per year tuition in August 2022 and then again in August 2023. He is certain that when he graduates in May 2024 he will be able to command an increase in his salary -- either from his current employer or from another employer -- as a result of the MS. Finance Program. Assume that David requires a rate of return on his investment of 9.5% per annum and that his first salary increase resulting from his degree will take place in August 2024. Also assume that David expects a 3.5% annual increase in his salary throughout his career and that he will receive forty annual paychecks after graduation, the first of which will be in August 2024. By how much must David's salary increase in August 2024 to justify his total outlays of $100,000 for tuition?
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