III. Nick is a 45 year-old civil engineer with a good work-life balance, but he is considering pursuing his MBA. It would take him three years of night courses to graduate, and he estimates that tuition would cost about $24,000 a year due at the beginning of each year. After he receives his MBA, he would apply to be a team leader, but Nick does not have any further desire to advance into management. The difference in salary between civil engineer and team lead is $7,800 annually. To pay for the MBA, Nick is going to borrow money from his 401k. Nick has been getting an average return of 7.5% in his 401k. Nick wants to retire at age 65. Page 4 of 7 What are the IRR and NPV for Nick's MBA? (5pts) Should Nick pursue his MBA? Which decision rule makes the most sense to use here and why? (3pts) Would your answer change if Nick was only 30 years old? Explain your answer. (2pts) Would your answer change if 45-year-old Nick's 401k was only growing at a 4% rate of return? Explain your answer. (2pts) Nick's current employer doesn't reimburse tuition for graduate school, but he could work for another firm. If Nick finds a firm that will pay for his tuition but the salary is lower, how much of a salary reduction could he afford to take? (5pts) III. Nick is a 45 year-old civil engineer with a good work-life balance, but he is considering pursuing his MBA. It would take him three years of night courses to graduate, and he estimates that tuition would cost about $24,000 a year due at the beginning of each year. After he receives his MBA, he would apply to be a team leader, but Nick does not have any further desire to advance into management. The difference in salary between civil engineer and team lead is $7,800 annually. To pay for the MBA, Nick is going to borrow money from his 401k. Nick has been getting an average return of 7.5% in his 401k. Nick wants to retire at age 65. Page 4 of 7 What are the IRR and NPV for Nick's MBA? (5pts) Should Nick pursue his MBA? Which decision rule makes the most sense to use here and why? (3pts) Would your answer change if Nick was only 30 years old? Explain your answer. (2pts) Would your answer change if 45-year-old Nick's 401k was only growing at a 4% rate of return? Explain your answer. (2pts) Nick's current employer doesn't reimburse tuition for graduate school, but he could work for another firm. If Nick finds a firm that will pay for his tuition but the salary is lower, how much of a salary reduction could he afford to take? (5pts)
