Questions 3&5

The MBA Decision Ben Bates graduated from college six years ago with a fintance The Ritter College of Business at Wilton University is one undergraduate degree. Although he is satisfied with his cur- of the top MBA programs in the country. The MBA degree rent job. his goal is to become an investment banker. He fecls requires two years of full-time enrollment at the university. that an MBA degree would allow him to achieve this goal. The annual tuition is $58,000, payable at the beginning of each After examining schools, he has narrowed his choice to either sehool year. Books and other supplies are estimated to cost Witton University or Mount Perry College. Although intern-. 52,000 per year. Ben expects that after graduation from Wilships are encouraged by both schools, to get class credit for ton, he will receive a job offer for about $87,000 per year, with the internship, no salary can be paid. Other than internships. a $10,000 signing bonus. The salary at this job will increase its MBA program. Ben currently works at the money management firm of The Bradley School of Business at Mount Perry College Dewey and Louis. His annual salary at the firm is $53,000 per began its MBA program 16 years ago. The Bradicy Schoot is year, and his salary is expected to increase at 3 percent per smaller and less well known than the Ritter Colfege. Bradicy. year until retirement. He is currently 28 years old and expects offers an accelerated one-year program, with a tuition cont of. to work for 38 more years. His current job includes a fully $75,000 to be paid upon matriculation. Books and other suppaid health insurance plan, and his current average tax rate is plies for the program are expected to cost $4,200. Ben thinks 26 pereent. Ben has a savings account with enough moncy to that he will receive an offer of $78,000 per year upon graduacover the entire cost of his MBA program. 194 PART 3 Valuation of Fiture Caan Flows