East Coast Yachts Case (textbook chapter 4): Answer these selected questions (not questions listed in textbook Warning: Remember that NPV functions assumes CFs starting THE MBA DECISION Net Present Value of Each Scenario NPVT Ben Bates graduated from college six years ago with a finance undergraduate degree. Since T ECY Wilton graduation, he has been employed in the finance department at East Coast Yachts. Although he is Mt. Perry Ben at East Coast Yachts satisfied with his current job, his goal is to become an investment banker. He feels that an MBA Current Salary $57,000 (T-1) degree would allow him to achieve this goal. After examining schools, he has narrowed his choice Salary Growth 3% (T=2-40) to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither Years till retiremer 40 For all scenarios 3 ? school will allow its students to work while enrolled in its MBA program. Tax Rate 26% stor Ben's annual salary at East Coast Yachts is $57,000 per year and gets free heathcare insurance, and his salary is expected to increase at 3 percent per year until retirement. He is currently 28 years old and expects to work for 40 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Ben has a savings account with enough money to cover the entire cost of his MBA program. Ben at Wilton MBA cash flows Annual Tuition $63,000 (T=0,1) Annual Fees $2,500 (T=0,1) New Salary $105,000 T=3 Signing Bonus $18,000 T-2 (taxable) Tax Rate 31% Bonus and salary Salary Growth 4% Annual Incr. Lodgin $2,000 (T-0,1) Annual Incr. Health $3,000 (T=0,1) The Ritter College of Business at Wilton 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 $63,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $2,500 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $105,000 per year, with an $18,000 signing bonus. Again assume salary is received at the end of the year for simplicity. The salary at this job will increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent. Assume his tax rate after graduating from Wilton University will be 31 percent regardless of his income level. Ben at Mt. Perry College 1-Year MBA cash flow Annual Tuition $75,000 (T-0) Annual Fees $3,500 (T=0) New Salary $88,000 T-2 Signing Bonus $15,000 T=1 Tax Rate 29% Bonus and salary Salary Growth 3.50% Annual Incr. Lodgir $2,000 (T=0) Annual Incr. Health $3,000 (T=0) The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated, one-year program, with a tuition cost of $75,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $3,500. Ben thinks that after graduation from Mount Perry, he will receive an offer of $88,000 per year, with a $15,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average income tax rate at this level of income will be 29 percent. Discount Rate 6.10% Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Ben also estimates that room and board expenses will cost $2,000 more per year at both schools than his current expenses, payable at the beginning of each year. The appropriate discount rate is 6.1 percent. Assume all salaries are paid at the end of each year. What Initial Salary after Wilton would make him indifferent between Wilton and staying at ECY? Answer Here How does Ben's age affect his decision to get an MBA? What other, perhaps nonquantifiable factors, affect Ben's decision to get an MBA? How does his age affect the decision?????? What other factors not listed could affect the decision? ??????? East Coast Yachts Case (textbook chapter 4): Answer these selected questions (not questions listed in textbook Warning: Remember that NPV functions assumes CFs starting THE MBA DECISION Net Present Value of Each Scenario NPVT Ben Bates graduated from college six years ago with a finance undergraduate degree. Since T ECY Wilton graduation, he has been employed in the finance department at East Coast Yachts. Although he is Mt. Perry Ben at East Coast Yachts satisfied with his current job, his goal is to become an investment banker. He feels that an MBA Current Salary $57,000 (T-1) degree would allow him to achieve this goal. After examining schools, he has narrowed his choice Salary Growth 3% (T=2-40) to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither Years till retiremer 40 For all scenarios 3 ? school will allow its students to work while enrolled in its MBA program. Tax Rate 26% stor Ben's annual salary at East Coast Yachts is $57,000 per year and gets free heathcare insurance, and his salary is expected to increase at 3 percent per year until retirement. He is currently 28 years old and expects to work for 40 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Ben has a savings account with enough money to cover the entire cost of his MBA program. Ben at Wilton MBA cash flows Annual Tuition $63,000 (T=0,1) Annual Fees $2,500 (T=0,1) New Salary $105,000 T=3 Signing Bonus $18,000 T-2 (taxable) Tax Rate 31% Bonus and salary Salary Growth 4% Annual Incr. Lodgin $2,000 (T-0,1) Annual Incr. Health $3,000 (T=0,1) The Ritter College of Business at Wilton 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 $63,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $2,500 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $105,000 per year, with an $18,000 signing bonus. Again assume salary is received at the end of the year for simplicity. The salary at this job will increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent. Assume his tax rate after graduating from Wilton University will be 31 percent regardless of his income level. Ben at Mt. Perry College 1-Year MBA cash flow Annual Tuition $75,000 (T-0) Annual Fees $3,500 (T=0) New Salary $88,000 T-2 Signing Bonus $15,000 T=1 Tax Rate 29% Bonus and salary Salary Growth 3.50% Annual Incr. Lodgir $2,000 (T=0) Annual Incr. Health $3,000 (T=0) The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated, one-year program, with a tuition cost of $75,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $3,500. Ben thinks that after graduation from Mount Perry, he will receive an offer of $88,000 per year, with a $15,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average income tax rate at this level of income will be 29 percent. Discount Rate 6.10% Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Ben also estimates that room and board expenses will cost $2,000 more per year at both schools than his current expenses, payable at the beginning of each year. The appropriate discount rate is 6.1 percent. Assume all salaries are paid at the end of each year. What Initial Salary after Wilton would make him indifferent between Wilton and staying at ECY? Answer Here How does Ben's age affect his decision to get an MBA? What other, perhaps nonquantifiable factors, affect Ben's decision to get an MBA? How does his age affect the decision?????? What other factors not listed could affect the decision