Options
1

2

3

Items

East Coast
Yacht

Ritter College
(2 year)

Mount Perry
College (1 year) Tuition
Books and other supplies

0
0

65000
2500

75000
3500

Room and board expenses

0

2000

2000

Health insurance plan

0

3000

3000

Expect salary (annual)
Bonus (assume this is after tax cash paid)
Growth rate
Average Tax rate

50000

90000

78000

0

15000

12000

3%
26%

4%
31%

3.50%
29%

Discount rate

6.50%

6.50%

6.50%

Year
0
1
2
3
4
5
6
7
8

Growing Annuity
Option 1 cash flow
PV
npv
0
$50,000.00
$34,741.78
$34,741.78
$51,500.00
$33,600.04
$68,341.82
$53,045.00
$32,495.81
$100,837.63
$54,636.35
$31,427.87
$132,265.50
$56,275.44
$30,395.03
$162,660.53
$57,963.70
$29,396.13
$192,056.66
$59,702.61
$28,430.06
$220,486.73
$61,493.69
$27,495.74
$247,982.47

9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40

$63,338.50
$65,238.66
$67,195.82
$69,211.69
$71,288.04
$73,426.69
$75,629.49
$77,898.37
$80,235.32
$82,642.38
$85,121.65
$87,675.30
$90,305.56
$93,014.73
$95,805.17
$98,679.33
$101,639.71
$104,688.90
$107,829.56
$111,064.45
$114,396.38
$117,828.28
$121,363.12
$125,004.02
$128,754.14
$132,616.76
$136,595.26
$140,693.12
$144,913.92
$149,261.33
$153,739.17
$158,351.35

$26,592.13
$25,718.21
$24,873.01
$24,055.58
$23,265.02
$22,500.45
$21,761.00
$21,045.85
$20,354.20
$19,685.28
$19,038.35
$18,412.67
$17,807.56
$17,222.34
$16,656.34
$16,108.95
$15,579.55
$15,067.55
$14,572.37
$14,093.46
$13,630.30
$13,182.36
$12,749.13
$12,330.15
$11,924.93
$11,533.03
$11,154.01
$10,787.45
$10,432.93
$10,090.06
$9,758.47
$9,437.77
$779,402.90

$274,574.59
$300,292.80
$325,165.80
$349,221.39
$372,486.41
$394,986.86
$416,747.86
$437,793.70
$458,147.90
$477,833.18
$496,871.52
$515,284.20
$533,091.76
$550,314.10
$566,970.44
$583,079.39
$598,658.94
$613,726.49
$628,298.86
$642,392.32
$656,022.62
$669,204.98
$681,954.11
$694,284.26
$706,209.19
$717,742.22
$728,896.23
$739,683.68
$750,116.61
$760,206.67
$769,965.14
$779,402.90

Question - 1: How does Ben's age affect his decision to get an MBA

Answer:
There exist three typical options for Ben, as shown on the table. Because the retirement age is fixe period, whenever starting his MBA is impacting on the net present value.

As shown on Column I and N, the earlier taking MBA, the higher NPV; the latter taking MBA, the lo

Comparing the three NPV column, it can be seen that after some yeras, with NPV decreasing for ta staying at current job at East Coast Yacht is becoming greater than taking MBA options, which in o later is not going to be always paid off.
As long as Ben takes MBA no later than year 26, which is 26 + 28 = 44 years old, MBA will benefit

Option 2 cash flow
PV
($72,500.00)
($72,500.00)
$15,000.00
$90,000.00
$93,600.00
$97,344.00
$101,237.76
$105,287.27
$109,498.76

npv
($72,500.00)
($68,075.12)
$13,224.89
$51,409.43
$50,202.63
$49,024.17
$47,873.37
$46,749.58
$45,652.17

($72,500.00)
($140,575.12)
($127,350.23)
($75,940.80)
($25,738.17)
$23,286.00
$71,159.37
$117,908.95
$163,561.12

re-ordered npv

$1,467,419.83
$1,441,328.81
$1,414,610.61
$1,387,250.14
$1,359,231.96
$1,330,540.28
$1,301,158.89

$113,878.71
$118,433.86
$123,171.21
$128,098.06
$133,221.99
$138,550.87
$144,092.90
$149,856.62
$155,850.88
$162,084.92
$168,568.31
$175,311.04
$182,323.49
$189,616.43
$197,201.08
$205,089.13
$213,292.69
$221,824.40
$230,697.37
$239,925.27
$249,522.28
$259,503.17
$269,883.30
$280,678.63
$291,905.78
$303,582.01
$315,725.29
$328,354.30
$341,488.47
$355,148.01
$369,353.93
$384,128.09

$44,580.52
$43,534.03
$42,512.11
$41,514.17
$40,539.66
$39,588.02
$38,658.73
$37,751.25
$36,865.07
$35,999.69
$35,154.63
$34,329.40
$33,523.55
$32,736.61
$31,968.14
$31,217.72
$30,484.91
$29,769.30
$29,070.49
$28,388.08
$27,721.70
$27,070.95
$26,435.48
$25,814.93
$25,208.95
$24,617.19
$24,039.32
$23,475.02
$22,923.96
$22,385.84
$21,860.35
$21,347.20
$1,174,648.07

$208,141.64
$251,675.68
$294,187.78
$335,701.95
$376,241.61
$415,829.64
$454,488.36
$492,239.61