John Ross graduated from college 6 years ago with a finance undergraduate degree. Although he is satisfied with his current job, his dream is to become an investment banker, he would need to take an MBA degree. He is, thus , looking for colleges, After some time,John has narrowed his choice to either Brandie's University or Carlton College. Both Schools allow and encourage internships. However, neither school will allow students to work while enrolled in a MBA program.
Option 1
He can keep his current job at the management from D&L. His Annual salary at the firm is $65,000 per year and is salary is expected to increase at 3% per year until retirement. He is curently 28 years old and he expects to work for 40 more years. His current job includes a full paid health insurance plan is current average tax rate is 26%. Ben has a savings account with enough money to cover the entire cost of the MBA program.
Option 2
The MBA program at Brandeis University requires two years of full-time enrollment at the university. The annual tuition is $70,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $3,000 per year. John expects that after graduaton from Brandeis University he will recieve a job offer of $110,000 per year with a signing bonus of 20,000. The exected salary will increase 4% oer year. Because if the higher salary the average income tax rate will be 31%.
Option 3 The Carlton College offers a one year program. The tuition cost is $85,000 to be paid upon matriculation. Books and other supplies for the program are expected to costs $45,000 John thinks after Carlton degree he will be able to receive an offer of $92,000 per year with a $18,000 signing bonus. The salary at his job will increase at 3.5% per year. His average tax rate at this level of income will be 29%.
Both schools offer a health insurance plan that will cost $3,000 per year, payable at the begining of the year John also estimates that room and board expenses will costs $2,000 more per year at both schools than his current expenses, payable at the beginning of each year. The appropiate discount rate is 6.3%.
How does John's age affect his decision to gt an MBA?
What other factors affect John's decision to get an MBA?
Assuming all salaries are paid at the end of the year, what is the best option for JOhn from a strictly financial view point of view?