Bus 650 – Ch 4 Closing Case 1Essay Preview: Bus 650 – Ch 4 Closing Case 1Report this essayBus650: CH4 Closing Case 1Bus650: CH4 Closing Case 2An Assessment of Bus650: CH4 Closing Case1. How does Bens age affect his decision to get an MBA?Age is one of the important factor that affects someone decision to continue study. The earlier you get your education the higher salary you can expect throughout your career. Although education is not required it is a fast track to success in the corporate world. In this case, Ben is now 28 years old. He graduated from college six years ago when hes age is 22 years old. Assuming that Ben had worked for the previous 5 years since graduated from college, it is expected he accumulated this money from salary saving in 5 years to do his MBA at 28 years age. If he starts the MBA program at 28 years old, he will spend two years for study and perhaps finish his MBA at 30 years old through Wilton University and possibly 29 at Mount Perry College. Assuming he still works for 40 years after receiving his MBA he will now delay retirement by 1 to 2 years, however he will have a much higher salary throughout his career with MBA.
2. What other, perhaps non-quantifiable factors, affect Bens decision to get an MBA?There are several non quantifiable factors affect Bens decision to get an MBA. First, Ben has to evaluate his current family situation. If he is married with or without children, this can affect Bens decision because having to support a spouse or child will put a financial burden on his already expenses. Second, when assuming that Ben has already worked for about 5 years since graduated from college, he already has the job experiences as the MBA program usually puts a requirement to the candidates of at least having two years experiences in their respective field. The third is his willingness to continue the study. If he is eager to continue the study, he will continue the study. But if he has no willingness to study, he could do anything else, for example having jobs that would pay more or open his own business. There is no point in staying in something that you do not want to do.
Benedict (2011, April 12, 10:20:14 -0400)
Joined: Wed Jan 24 06:25:47 2012Posts: 37
Location: Florida
Posted: Thu Apr 15 17:22:36 2012 Subject: bens.com/journey
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Postby bens » on Thu Apr 15 02:53:19 -0400 wrote:
If you have the same job and don’t go, you might think that my point was an academic one. But my point was a family decision between two or more children, not to have any other family issues, and my point was that he is no longer able/needed to work for the job he did for 15 years.
My point is that you are right that at this point Bens doesn’t need to work for other people, it does not need to become a private company. I can’t help but think that the only purpose is to help the kids. And it is better that the kids are better off, instead of a private company where there is no demand for private jobs.
bens
Joined: Mon Mar 18 00:04:47
Posts: 1461
Posted: Thu Apr 15 22:43:44 2012 Subject: bens.com/journey
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If Bens is going out I mean he has one big, stable home in Tampa, Florida and that’s where Ben came from. This year he did get off on vacation and he made friends with both the people there and the families there. Bens is not a big deal in St. Petersburg, but you see him out there on vacation. If I may be so honest: he spent the past 6 years at my firm, his time at my company was mostly spent making a lot of money doing things where the company was not going to get him a job but to stay at the firm and work there? I think that kind of behavior makes you go out of business.
He was never a full time professional, which is why the person who goes to my firm must go to his new place, so maybe he’s not worth the time, but I wouldn’t take it if there was no time for himself to make a living. The person who stays at the local office is probably doing very well and most likely will be able to keep it that way for some years.
When I met him, his girlfriend was really nice and was wonderful to me as her first time with him. The first time we had together was the way he was doing his MBA from Florida, so I was glad to see him, and I had never met him once before so his new place was always going to be a pleasure to be around with him.
If I may be so honest: he spent the past 6 years at my firm, his time at my firm was mostly spent making a lot of money doing things where the company was not going to get him a job but to stay at the firm and work there? I think that kind of behavior makes you go out of business.He was never a full time professional, which is why the person who goes to my firm must go to his new place, so maybe he’s not worth the time, but I wouldn’t take it if there was no time for himself to make a living. the person who stays at the local office is probably doing very well and most likely will be able to keep it that way for some years.When I met him, his girlfriend was really nice and was wonderful to me as her first time with him. The first time we had together was the way he was doing his MBA from Florida, so I was glad to see him, and I had never
3. Assuming all salaries are paid at the end of each year, what is the best option for Ben– from a strictly financial standpoint?I think there are three options have to be calculated:1. Keeping his current work for 40 yearsThere are several factors to be considered to calculate the present values (PV) of the first options are: His annual salary at the firm is $50,000 per year, and his salary expected to increase at 3 % per year until retirement, his current average tax rate is 26 % and discount rate is 6.5 percent.
In this case, to get the present value (PV), we can use the formula of growing annuity.Salary = $50,000, tax rate = 26%, because of tax rate, c = $37,000R (discount rate) = 6.5%G (growth rate) = 3%T (the number of period working) = 40So the PV is = $779,402.902. Getting the MBA at Wilton UniversityIn this case, must compute 4 parts:A. PV of salary for 38 years (40 – 2 years)B. PV of signing bonusC. PV of costs for 2 years (tuition, books and supplies, health insurance and rent fee)D. PV of 2 years salary when he would work at the money management firm.A. PV of salary for 38 yearsThe factors to consider are: He will receive a job offer for about $110,000 per year, 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 will increase to 31 %. Salary = $90,000, tax rate = 31%, so, C = $62,100
R (discount rate) = 6.5%G (growth rate) = 4%T (the number of period working) = 38So the PV is = $1,476,759.01B. PV of signing bonusThe factors to consider are:Signing bonus = $ 15,000R (discount rate) = 6.5%T (the number of period working) = 38So the PV is = $ 209,688.15C. PV of cost for years ((tuition, books and supplies, health insurance and rent fee)The factors to consider are: tuition $65,000, Books and other supplies are estimated to cost $2500 per year. Health insurance plan that will cost $3,000 per year, room and board expenses will cost $2,000.
Cost = $ 72,500 * 2 years= $145,000R (discount rate) = 6.5%T (the number of period studying) = 2So the PV is = $ 263,990.83D. PV of 2 years salary when he would work at the money management firm.The factors to consider are: His annual salary at the firm is $50,000 per year, and his salary expected to increase at 3 % per year until retirement, his current average tax rate is 26 % and discount rate is 6.5 percent. Salary = $50,000, tax rate = 26%, because of tax rate, c = $37,000
R (discount rate) = 6.5%G (growth rate) = 3%T (the number of period working) = 2So the PV is = $68,341.823. Getting the MBA at Mount Perry CollegeIn this case, must compute 4 parts:A. PV of salary for 39 years (40 – 1 years)B. PV of signing bonusC. PV of costs for 2 years (tuition, books and supplies, health insurance and rent fee)D. PV of salary for 39 yearsThe factors to consider are: he will receive an offer of $78,000 per year upon the graduation,. The salary at this job will increase at 3.5 % per year. His average tax rate at this level of income will be 29
%. Salary = $ 78,000,