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Your current salary is $55,000 (ignore taxes). Assume for simplicity that you receive this entire amount at the end of the year (your paycheck arrives
Your current salary is $55,000 (ignore taxes). Assume for simplicity that you receive this entire amount at the end of the year (your paycheck arrives at t=1). You anticipate raises of 2% every year until you retire (so at t=2 you get $56,100, for example). Your last year of work will be t=30.
You are considering starting a 2-year MBA program today. If you do,
- You must pay $34,000 in tuition and fees today and another $34,000 in 1 year.
- You will earn no money in the next two years, t=1 and t=2.
- Your new salary, received for the first time at t=3, will be $75,000.
- This salary will grow at 3% per year until you retire.
- Your last year of work will still be t=30 (so you work 28 years).
Your discount rate is 4%. Leaving aside your passion for your new job and the lifelong friendships you will form, what is the NPV of doing the MBA? Please show all work
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