Ben believes that the appropriate analysis is to calculate the future value of

Ben believes that the appropriate analysis is to

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4)Ben believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement? 1. If Ben decides not to attend any MBA program, the FV will be: FV= PV x ( 1 + r ) 40 = 935,283.4855 ( 1 + 0.065 ) 40 = 11,612,549.466 2. If Ben decides to attend Wilton University, the FV will be: FV= PV x ( 1 + r ) 40 = 1806116.4 ( 1.065 ) 38 + 17633.57 ( 1.065 ) 2 - 132860 ( 1.065 ) 2 + 82076.508 ( 1.065 ) 2 = 19,771,099.95 + 20000.43 – 150693.13 + 93,093.23 = 19,733,500.4
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3. If Ben decides to attend MBA at Mount Perry College, FV will be: FV= PV x ( 1 + r ) 40 = 1463821.2 ( 1.065 ) 39 + 15870.22 ( 1.065 ) 2 - 84033.34 ( 1.065 ) 1 + 44400 ( 1.065 ) 1 = 17,065,646.13 +18,000.40 – 89,495.50 + 47,286 = = 17,041,437.03 FV(Wilton) is the highest, so again, we can claim that MBA at Wilton University would be Ben’s best choice. 5)What initial salary would Ben need to receive to make him indifferent between attending Wilton University and staying in his current position? 6)Suppose, instead of being able to pay cash for his MBA, Ben must borrow the money. The current borrowing rate is 5.4%. How would this affect his decision? 1. If Ben decides to attend Wilton University, the total cost = $146,000, r = 5.4%, n=5, so the PMT= $34,096.06
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