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MINI CASE The MBA Decision Raj Danielson graduated from university six years ago with a finance undergraduate degree. Although he is satisfied with his current
MINI CASE The MBA Decision Raj Danielson graduated from university 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 Assiniboine University or the University of Passy. Both schools encourage intern ships, but to get class credit for the internship, no salary can be accepted. Other than internships, neither school allows its students to work while enrolled in its MBA program. Raj currently works at the money management firm of Prash and Sid. His annual salary at the firm is $ and his salary is expected to increase at per year until retirement. He is currently years old and expects to work for more years. His current job includes a fully paid health insur ance plan, and his current average tax rate is Raj has a savings account with enough money to cover the entire cost of his MBA program. The Sentinel School of Business at Assiniboine University is one of the top MBA programs in the country. The MBA degree requires two years of fulltime enrollment at the university. The annual tuition is $ payable at the beginning of each school year. Books and other supplies are es timated to cost $ per year. Raj expects that after graduation from Assiniboine, he will receive a job offer for about $ per year, with a $ signing bonus. The salary at this job will in crease at per year. Because of the higher salary, his average income tax rate will increase to The Pond School of Business at the University of Passy began its MBA program years ago. The Pond School is smaller and less well known than the Sentinel School. It offers an accelerated one year program, with a tuition cost of $ to be paid upon matriculation. Books and other supplies for the program are expected to cost $ Raj thinks that he will receive an offer of $ per year upon graduation, with an $ signing bonus. The salary at this job will increase at per year. His average tax rate at this level of income will be Both schools offer an extended health insurance plan that will cost $ per year, payable at the beginning of the year. Raj also estimates that room and board expenses will decre Questions Calculate the initial salary that Raj would need to receive to make him indifferent between Assiniboine University and staying at his current position? Suppose instead of being able to pay cash for his MBA, Raj must borrow the money. The current borrowing rate is How would this affect his decision?
MINI CASE The MBA Decision
Raj Danielson graduated from university 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 Assiniboine University or the University of Passy. Both schools encourage intern ships, but to get class credit for the internship, no salary can be accepted. Other than internships, neither school allows its students to work while enrolled in its MBA program. Raj currently works at the money management firm of Prash and Sid. His annual salary at the firm is $ and his salary is expected to increase at per year until retirement. He is currently years old and expects to work for more years. His current job includes a fully paid health insur ance plan, and his current average tax rate is Raj has a savings account with enough money to cover the entire cost of his MBA program. The Sentinel School of Business at Assiniboine University is one of the top MBA programs in the country. The MBA degree requires two years of fulltime enrollment at the university. The annual tuition is $ payable at the beginning of each school year. Books and other supplies are es timated to cost $ per year. Raj expects that after graduation from Assiniboine, he will receive a job offer for about $ per year, with a $ signing bonus. The salary at this job will in crease at per year. Because of the higher salary, his average income tax rate will increase to The Pond School of Business at the University of Passy began its MBA program years ago. The Pond School is smaller and less well known than the Sentinel School. It offers an accelerated one year program, with a tuition cost of $ to be paid upon matriculation. Books and other supplies for the program are expected to cost $ Raj thinks that he will receive an offer of $ per year upon graduation, with an $ signing bonus. The salary at this job will increase at per year. His average tax rate at this level of income will be Both schools offer an extended health insurance plan that will cost $ per year, payable at the beginning of the year. Raj also estimates that room and board expenses will decre
Questions
Calculate the initial salary that Raj would need to receive to make him indifferent between Assiniboine University and staying at his current position?
Suppose instead of being able to pay cash for his MBA, Raj must borrow the money. The current borrowing rate is How would this affect his decision?
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