Des Buratto graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Red River University or University of Upper Canada. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program.

Des Buratto currently works at the money management firm of Dewey, Cheatem and Howe. His annual salary at the firm $50,000 per year. He is currently 28 years old and expects to work for 35 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Des Buratto has a savings account with enough money to cover the entire cost of his MBA program.

The Ritter College of Business at Red River University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $60,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $2,500 per year. Des Buratto expects that after graduation from Red River, he will receive a job offer for about $95,000 per year, with a $15,000 signing bonus. Because of the higher salary, his average income tax rate will increase to 31 percent.

The Bradley School of Business at University of Upper Canada began its MBA program 16 years ago.

The Bradley School is smaller and less well known than the Ritter. Bradley offers an accelerated, one-year program, with a tuition cost of $75,000 to be paid at the start of his studies. Books and other supplies for the program are expected to cost $3,500. Des Buratto thinks that he will receive an offer of $78,000 per year upon graduation, with a $10,000 signing bonus. His average tax rate at this level of income will be 29 percent.

Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Des Buratto also estimates that room and board expenses will cost $20,000 per year at either school. The appropriate discount rate is 6.5 percent.

Answer the following:

• Assuming all salaries are paid at the end of each year, what is the best option for Des Buratto- from a strictly financial standpoint? This must be handwritten and a timeline is required.
• Prepare a one page typed memo describing how Des Burattos age affects his decision to get an MBA and why. Include in your memo non-financial factors that could affect his decision.

Hint: To calculate the net salary multiply the gross salary by (1 tax rate).