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Georgina currently works for a large Australian bank as a loans ofcer, earning $53,000 per year after taxes. She is considering quitting work for two
Georgina currently works for a large Australian bank as a loans ofcer, earning $53,000 per year after taxes. She is considering quitting work for two years to earn a Masters' degree in Business Administration (an MBA). She believes that she could earn $70,000 per year after taxes if she had an MBA now, working in the corporate nance section of the same bank. MBA tuition fees are $46,000 per year and other direct costs of studying are $4,000 per year. The rental cost of an apartment near campus is $23,000 per year, compared to the $25,000 Georgina is currently paying. Georgina's real discount rate is 10 per cent per year. She just turned 33 and plans to retire the day she turns 66, whether or not she gets an MBA. Georgina believes that real wages will grow at 1.5% per year. Based on this information, should Georgina quit work to earn an MBA? Treat all income and costs as occurring at the beginning of each year. Provide details of your reasons. Now, suppose that Georgina believed that real wages would grow more quickly if she had an MBA rather than the 1.5% she believes her real wages will grow in her current job. What annual real wage growth for an MBA job would be required to provide Georgina a 12% rate of return on her potential investment in an MBA? Can you think of a reason why wage growth may be higher with an MBA rather than in Georgina's current job
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