A prospective mba student earns 50000 per year in her


A prospective MBA student earns $50,000 per year in her current job and expects that amount to increase by 12% per year. She is considering leaving her job to attend business school for two years at a cost of $45,000 per year. She has been told that her starting salary after business school is likely to be $85,000 and that amount will increase by 15% per year. Consider a time horizon of 10 years, use a discount rate of 11%, and ignore all considerations not explicitly mentioned here. Assume cash flows (i.e., immediate, one year from now, two years from now, etc.) that allow you to ignore beginning-of-year and end-of-year cash flow issues. Also assume that the choice can be implemented immediately so that for the MBA alternative the current year is the first year of business school. What is the net present value of the more attractive alternative?

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Financial Management: A prospective mba student earns 50000 per year in her
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