This is Summer 2021, and you want to work out whether going to graduate school for your MBA, an otherwise desirable prospect, is a financially sound decision. You have been offered a job that pays $144,000 per year starting September 1, 2021, and you plan to take it up if you do not go for an MBA. If you do go for an MBA, you will:

have to pay $72,000 each on September 1, 2021 and September 1, 2022 toward the cost of education, andstart earning only upon graduation, with your post-MBA job starting on September 1, 2023.

For computational simplicity, assume that you are paid your annual salary in a lump sum at the end of each working year. You plan to retire on August 31, 2053 whether or not you go for an MBA in 2021. For the purposes of this problem you find it reasonable to assume that the term structure is flat at 4.5%.

Assuming that your income remains constant over time with or without an MBA, that your starting salary after MBA is $189,000, and that you save a constant 15% of your income over your working life, work out the amount you would have saved on retirement (a) if you go for an MBA, and (b) if you do not go for an MBA.

Answer (i) above assuming that your income grows at a constant rate of 2.25% per year without an MBA, and 3.6% a year with an MBA. Also work out how long your savings will last if you withdraw $225,000 every year in retirement starting August 31, 2054 both with and without an MBA.

Answer (i) above assuming that your income grows at a constant rate of 3.6% per year without an MBA, and 4.5% a year with an MBA. Also work out how long your savings will last if you withdraw $270,000 every year in retirement starting August 31, 2054 both with and without an MBA.