Need help with a math problem. Needto write paper about which option this man should go with and put it into amath problem and solve. I am having issues with setting up the math part of it.Our teacher hasn’t helped us with this at all. Here is the scenario:
David Jetter graduated fromcollege six years ago with a finance undergraduate degree. Although he issatisfied with his current job, his goal is to become an investment banker. Hefeels that an MBA degree would allow him to achieve his goal. After examiningschools, he has narrowed his choice to either Prentice University or MountAlliance College. Although internships are encouraged by both schools, to getclass credit for the internship, no salary can be paid. Other than internships,neither school will allow its students to work while enrolled in its MBAprogram.
David currently works at themoney management firm of Dewey and Louis. His annual salary at the firm is$60,000 per year, and his salary expected to increase at 3 % per year untilretirement. He is currently 28 years old and expects to work for 40 more years.His current job includes a fully paid health insurance plan, and his currentaverage tax rate is 26 %. David has savings account with enough money to coverthe entire cost of his MBA program.
The Ritt College of Business atPrentice University is one of the top MBA programs in the country. The MBAdegree requires two years of full time enrollment at the university. The annualtuition is $65,000, payable at the beginning of each school year. Books andother supplies are estimated to cost $3000 per year. David expects that aftergraduation from Prentice, he will receive a job offer for about $110,000 peryear, with a $20,000 signing bonus. The salary at this job will increase at 4 %per year. Because of the higher salary, his average income tax rate willincrease to 31 %.
The Bradel School of Businessat Mount Alliance College began its MBA program 16 years ago. The Bradel Schoolis smaller and less well known than the Ritt College. Bradel offers anaccelerated, one – year program, with a tuition cost of $80,000 to be paid uponmatriculation. Books and other supplies for the program are expected to cost$4,500. David thinks that he will receive an offer of $92,000 per year upon thegraduation, with an $18,000 signing bonus. The salary at this job will increaseat 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 beginning of the year.
David also estimates that roomand board expenses will cost $2,000 more per year at both schools than hiscurrent expenses, payable at the beginning of each year. The appropriatediscount rate is 6.5 percent. 1.
David Jetter graduated fromcollege six years ago with a finance undergraduate degree. Although he issatisfied with his current job, his goal is to become an investment banker. Hefeels that an MBA degree would allow him to achieve his goal. After examiningschools, he has narrowed his choice to either Prentice University or MountAlliance College. Although internships are encouraged by both schools, to getclass credit for the internship, no salary can be paid. Other than internships,neither school will allow its students to work while enrolled in its MBAprogram.
David currently works at themoney management firm of Dewey and Louis. His annual salary at the firm is$60,000 per year, and his salary expected to increase at 3 % per year untilretirement. He is currently 28 years old and expects to work for 40 more years.His current job includes a fully paid health insurance plan, and his currentaverage tax rate is 26 %. David has savings account with enough money to coverthe entire cost of his MBA program.
The Ritt College of Business atPrentice University is one of the top MBA programs in the country. The MBAdegree requires two years of full time enrollment at the university. The annualtuition is $65,000, payable at the beginning of each school year. Books andother supplies are estimated to cost $3000 per year. David expects that aftergraduation from Prentice, he will receive a job offer for about $110,000 peryear, with a $20,000 signing bonus. The salary at this job will increase at 4 %per year. Because of the higher salary, his average income tax rate willincrease to 31 %.
The Bradel School of Businessat Mount Alliance College began its MBA program 16 years ago. The Bradel Schoolis smaller and less well known than the Ritt College. Bradel offers anaccelerated, one – year program, with a tuition cost of $80,000 to be paid uponmatriculation. Books and other supplies for the program are expected to cost$4,500. David thinks that he will receive an offer of $92,000 per year upon thegraduation, with an $18,000 signing bonus. The salary at this job will increaseat 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 beginning of the year.
David also estimates that roomand board expenses will cost $2,000 more per year at both schools than hiscurrent expenses, payable at the beginning of each year. The appropriatediscount rate is 6.5 percent. 1.
| I would need to find the future value of each option and see which option is the best financially for him. I am just having problem calculating the future values properly and figuring in the discount rate as well as benefits and losses. | | | |
