Raj currently works at the money management firm of Prash and Sid. His annual salary at the firm is $$55,000$ 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 $38$ more years. His current job includes a fully paid health insurance plan, and his current average tax rate is $26$ percent. 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 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. Raj expects that after graduation from Assiniboine, he will receive a job offer for about $$98,000$ per year, with a $$15,000$ signing bonus. 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.

The Pond School of Business at the University of Passy began its MBA program $16$ 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 $$80,000$ to be paid upon matriculation. Books and other supplies for the program are expected to cost $$3,500.$ Raj thinks that he will receive an offer of $$81,000$ per year upon graduation, with a $$10,000$ signing bonus. The salary at this job will increase at $3\mathrm{.}5$ percent per year. His average tax rate at this level of income will be $29$ percent.

Both schools offer a health insurance plan that will cost $$300$ per year, payable at the beginning of the year. Raj also estimates that room and board expenses will cost $$20,000$ per year at both schools. The appropriate discount rate is $6\mathrm{.}5$ percent.

Q$1.$ What is the best option for Raj from a strictly financial standpoint?

Show your workings for the following three choices:

$($i$)$ remain at his current job

$($ii$)$ pursue an Assiniboine MBA $($

$($iii$)$ pursue a Passy MBA $(25$ marks$)$

Q$2.$ Determination of breakeven initial salary