Mini-Case Study: The MBA Decision
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Mini-Case Study: The MBA Decision
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In this case study, found on page 134 of your course text, an individual is making a decision on what is
the best option for pursuing an MBA and has asked for your advice. After reading the case study, briefly
answer the six questions at the end of the study ( 3 sentences minimum each).
MINI-CASE STUDY: THE MBA DECISION 1
Question 1
Age is a key important factor in studying, and Ben being 28Years old now and
hvinggraduted from college six years ago he must have been working since then. This will mean
that he has been saving enough and has money that can sustain him to be in school now and this
will just take him two years to be in school and this will then give the reason as to why age will
affect his decision of getting an MBA (Slater, McCubbrey & Scudder, 1995).
Question 2
Ben has experience of work and this is arequiremnt of the MBA program and this will
mean that he has added quantifiable factors in attaining his MBA (Savage & Hazen, 2002). He
now has experience in his respective field and on the family situation is an added advantage to
him. Spouse support is very important to Bens situation.
Question 3
Ben needs to consult his present values (PV) to be on the safe saving side. The growing
annuity formula is all that should be used to ensure that savings are done accordingly (Quintal &
Phau, 2014).
Salary = $60,000, tax rate = 26%, because of the tax rate, c = $44,400
MINI-CASE STUDY: THE MBA DECISION 1
R (discount rate) = 6.5%
G (growth rate) = 3%
T (the number of period working) = 40
So the PV is = $ 937,474.28
Present Value (PV) of Growing Annuity.
PV GA = C (1 – ( (1+g)/(1+r)) t / r – g )
PV GA = $44 400 (1 – ((1+3%)/(1+6.5%)) 40 / 6.5% – 3%)
PV GA = $44 400 (1 – ((1.03)/(1.065)) 40 / 0.035)
PV GA = $ 44 400 (1 – 0.261 / 0.035)
PV GA = $44 400 (0.739 / 0.035)
PV GA = $44 400 (21.114)
PV GA = $ 937,474.28
Question 4
Through use of his annual salary ben will calculate the future value
Salary = $60,000, tax rate = 26%, because of the tax rate, c = $44,400
G (growth rate) = 3%
MINI-CASE STUDY: THE MBA DECISION 1
T (the number of period working) = 40
So the FV is = $11,639,750.53
FV = PV x (1+r) t
FV = $937 474.28 (1.065) 40
FV = $937 474.28 (12.416)
FV = $11,639,750.53
Question 5
Staying in his current position, PV 1 = $937,474.28
Getting the MBA at Wilton University, PV2 = $ 1,804,927.68
When PV1=PV2
21,06C1 = $75,900 * 23,78
MINI-CASE STUDY: THE MBA DECISION 1
21, 06 C1 = $ 1 806 116.4
C1 = $85,760.51
Question 6
Ben will have to borrow $146,000 to get the MBA at the Wilton, University for two years and
this will prove to be very tedious to the lender (Campbell & Ellingson, 2010). The current
borrowing rate from the bank is 5, 4%. Assuming he pledges to pay out the principal plus interest
every year for five years, this is how it will be tabulated:
Loan amount: $146,000
Interest rate: 5, 4%
Long term: 5
Loan payment: $ 34.096,06
Amortization table 1.0:
Beginning
balance
Total
payment
Interest paid Principal paid
Ending
balance
1 146.000,00 34.096,06 7.884,00 26.212,06 119.787,94
2 119.787,94 34.096,06 6.468,55 27.627,51 92.160,43
3 92.160,43 34.096,06 4.976,66 29.119,40 63.041,04
4 63.041,04 34.096,06 3.404,22 30.691,84 32.349,19
5 32.349,19 34.096,06 1.746,86 32.349,20 (0,01)
Totals 170.480,30 24.480,28 146.000,01
MINI-CASE STUDY: THE MBA DECISION 1
The total payment in five years is $170.580,30. Then, when we calculated the present value with
discount rate 6,5% and period five years:
C = $170.580,30
R (discount rate) = 6, 5%
T (the number of period) = 5
So the PV is = $ 708,875.80
References
Campbell, K., & Ellingson, D. A. (2010). Cooperative learning at A distance: An experiment
with wikis. American Journal of Business Education, 3(4), 83-89
Quintal, V., & Phau, I. (2014). Students’ perceptions of an internationalised learning
environment. Marketing Intelligence & Planning, 32(1), 89-106
Savage, C. M., & Hazen, M. A. (2002). Challenges in creating reflective OD consumers:
Distilling the essence of organizational development for non-OD specialists. Organization
Development Journal, 20(4), 78-84
Slater, J. S., McCubbrey, D. J., & Scudder, R. A. (1995). Inside an integrated MBA: An
information systems view. MIS Quarterly, 19(3),
