Mini-Case Study: The MBA Decision
It is critical that the writer follow APA 6th edition for this papers as the Prof is very particular about that , I am already loosing a lot of points for that in my previous papers of last week. so I have also uploaded a doecument he send to guide us on how to use APA 6th edition to complete this assignments
Mini-Case Study: The MBA Decision
For this assignment I have attached the case study mentioned below in the question for the writer to use in completing this paper. The prof took me a lot of points for the previous paper because of the APA which he said was very bad. I will also upload a document which he send to me indicating how the paper has to be using APA 6th edition.
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).
Introduction
Graduating from an MBA class is mostly related to success and good living associated with high paying jobs. But making the final to quit from a secure job and taking the chances to move up the ladder maybe one of the hardest decisions that most potential students experience. These paper looks at the process of determining the best decision to take considering all the quantifiable and the non quantifiable factors.
Financial Factors that Ben Bates must consider
1. The age of Ben is relevant when estimating the number of years that he can work. For example if his age is currently 30yrs, and if he is expected to retire after reaching the age of 55yrs then his remaining working life would be 25yrs.
2. The other non-quantifiable are the increased taxation that is progressive, the bonus that’s payable once and the other medical health benefits that are offered while studying for post graduating degrees.
3. Benefits from the current job
| Interest | C | Years | rate | PV Annuity | Tax | After Tax | |
| Annuity due | 1.03 | 65,000 | 40 | 0.03 | 1547533.98 | 402358.84 | 1145175.148 |
| Formula | C * (1.05^-n-1)/0.05) *1.05 | ||||||
| Benefits | After | MBA | Graduation | ||||
| Interest | C | Years | rate | PV Annuity | Tax | After Tax | |
| Annuity due | 1.04 | 110,000 | 38 | 0.04 | 9,835,006.50 | 3048852.02 | 6,786,154.49 |
| Formula | C * (1.05^-n-1)/0.05) *1.05 |
4.
| Future Value (After MBA graduation) | ||||
| Years | Present value | Interest | FV | |
| 38 | 110000 | 1.04 | 488269.5 | |
| Future Value (Current Job Benefits) | ||||
| Years | Present value | Interest | FV | |
| 40 | 65000 | 1.03 | 212032.5 |
The future values are not for periods over 30 yrs and the interest rates are lower than 10% it would be better to calculate the options using the annuities due.
5. The Present value of the benefits he receives from the current employment are;
| PV of all salary payments in 40 years | 1,145,175.15 | ||||
| Taxes | -297,746 | ||||
| Total benefits | 847,429.61 | ||||
| MBA Course $70,000 per yr for 2yrs | 140,000 | ||||
| Books | 6000 | ||||
| Taxes | 2103707.89 | ||||
| Total Exp | 2,249,708 | ||||
| Bonus | 20,000 | ||||
| MBA Job income for 38yrs | 6,786,154.49 | ||||
| Savings | 4,556,446.59 |
The total benefits to be derived from the job offers are much more than the current benefits from the current job. The MBA offer has a net benefit of $4,536,446.59 on getting a job after completion. While the current job offers a total of 867,429.60. (Ross, Westerfield & Jaffe, 2013, p.175).
Ben would need a salary of; $4,556,446.59 – 847829.61 = 3,708,617
The present value of 3,708,617 at 3% interest for 40 years = 1,136,902 per year which is equivalent to $94,741.83 per month;
| PV = | Years | Future value | Interest | PV | PM | |
| 40 | 3708617 | 1.03 | 1136902 | 94741.83 |
| 6. PV of all salary payments in 40 years | 1,145,175.15 | ||||
| Taxes | -297,746 | ||||
| Total benefits | 847,429.61 | ||||
| MBA Course $70,000 per yr for 2yrs + interest | 150,675 | ||||
| Books | 6000 | ||||
| Taxes | 2103707.89 | ||||
| Total Exp | 2,260,383 | ||||
| Bonus | 20,000 | ||||
| MBA Job income for 38yrs | 6,786,154.49 | ||||
| Savings | 4,545,771.59 |
Discussion
The present value of the total benefits that Ben bates can possibly earn from his employment in the next forty years is $1,145,175.148 at a growth of 3%. The other benefits that he can derive from his employment are the low taxes that are chargeable because of low salaries. The amounts receivable after graduating from the MBA class are very high compared to the benefits that Ben Bates receives from his current employment even after factoring all the expenses incurred while seeking the MBA degree course. I certainly would recommend to him to take the MBA class.
Conclusion
The option to take an MBA degree course is a good decision compared to the current job undertaking. It would be profitable for Ben Bates to quit the current job and enrolled at the Ritter College of Business Studies at Wilton University. The cost of the tuition, books and also the loan interests are still affordable given the outcome of the MBA degree course.
Reference
Ross, S. R., Westerfield, R. W. & Jaffe, J. (2013) Corporate finance (10th Ed.) New York, NY: McGraw-Hill. pp. 175
