THE MBA DECISION Ben Bates graduated from college six years ago with a finance undergraduate degree. Since graduation, he has been employed in the finance department at East Coast Yachts. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program. Ben’s annual salary at East Coast Yachts is $61,000 per year, and his salary is expected to increase at 3 percent per year until retirement. 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 current average tax rate is 25 percent. Ben has a savings account with enough money to cover the entire cost of his MBA program. The Ritter College of Business at Wilton University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $65,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $2,800 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $107,000 per year, with an $20,000 signing bonus. The salary at this job will increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 30 percent. The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated, one-year program, with a tuition cost of $78,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,000. Ben thinks that after graduation from Mount Perry, he will receive an offer of $90,000 per year, with a $17,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average income tax rate at this level of income will be 28 percent. Both schools offer a health insurance plan that will cost $3,500 per year, payable at the beginning of the year. Ben also estimates that room and board expenses will cost $2,500 more per year at both schools than his current expenses, payable at the beginning of each year. The appropriate discount rate is 6.2 percent. Assume all salaries are paid at the end of each year. Assuming all salaries are paid at the end of each year, what is the best option for Ben—from a strictly financial standpoint? He has three choices: remain at his current job, pursue a Wilton MBA, or pursue a Mt. Perry MBA. In order to determine the best option, you will need to calculate the after tax value of each option (perform analysis below).

Timeline for growing annuity for 40 years Salary Wilton MBA Mount Perry MBA

Timeline Timeline Timeline

Year Value Year Value Year Value

1. Barriers to entry enhance the market power of many business organizations because they make it difficult for would-be competing firms to enter into an established market. Describe each of the government barriers to entry set forth below:

     a. Patents

     b. Regulations

     c. Business Taxes


1A. What are some basic economic pros and cons of government regulation?

2. With your MBA in hand from Indiana Tech University and a few years of experience under your belt, you have recently been hired to serve as the business manager of a fairly large company. The company faces very tough competition from one primary competitor, and so you are tasked with recommending a strategy to try to eliminate this competitor. Reviewing your coursework in MBA 5120, your options come down to either limit pricing or predatory pricing. Which pricing method will you recommend, and explain why?

(Select only one pricing strategy; not both strategies or combinations of both strategies.)  

A. Is the pricing method you chose guaranteed to work? Explain why or why not.

1. Barriers to entry enhance the market power of many business organizations because they make it difficult for would-be competing firms to enter into an established market. Describe each of the government barriers to entry set forth below:

     a. Patents

     b. Regulations

     c. Business Taxes


1A. What are some basic economic pros and cons of government regulation?

2. With your MBA in hand from Indiana Tech University and a few years of experience under your belt, you have recently been hired to serve as the business manager of a fairly large company. The company faces very tough competition from one primary competitor, and so you are tasked with recommending a strategy to try to eliminate this competitor. Reviewing your coursework in MBA 5120, your options come down to either limit pricing or predatory pricing.  Which pricing method will you recommend, and explain why?

(Select only one pricing strategy; not both strategies or combinations of both strategies.)  

A. Is the pricing method you chose guaranteed to work? Explain why or why not.

Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although Internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program.

Ben Currently works at the money management firm of Dewey and Louis. His Annual salary at the firm is $53,000 per year, and his salary is expected to increase at 3 percent per year until retirement. He is currently 28 years old and expects to work for 38 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Ben has a savings account with enough money to cover the entire cost of his MBA program.

The Ritter College of Business at Wilton University is one of the top MBA programs in the Country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $58,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $2000 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $87,000 per year, with a $10,000 signing bonus. The salary at this job will increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent.

       The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than Ritter College. Bradley offers an accelerated one-year program, with a tuition cost of $75,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4200. Ben thinks that he will receive an offer of $78,000 per year upon graduation, with an $8,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average tax rate at this level of income will be at 29%.

       Both Schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Ben has also found that both schools offer graduate housing. His room and board expenses will decrease by $4,000 per year at either school he attends. The appropriate discount rate is 6.5 percent.

Assume that Ben decides to work on the MBA program at Wilton University, what is the present value of direct cost?

Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve his goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program.

Ben currently works at the money management firm of Dewey and Louis. His annual salary at the firm is $65,000 per year, and his salary expected to increase at 3% per year until retirement. 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 current average tax rate is 26%. Ben has savings account with enough money to cover the entire cost of his MBA program.

The Ritter College of Business at Wilton University is one of the top MBA programs in the country. The MBA degree requires two years of full time enrollment at the university. The annual tuition is $70,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $3000 per year. Ben expects that after graduation from Wilton, 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%. The Bradley School of Business at Mount Perry College began its MBA program 16 years ago.

The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated, one year program, with a tuition cost of $85,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,500. Ben thinks that he will receive an offer of $92,000 per year upon the graduation, with an $18,000 signing bonus. The salary at this job will increase at 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. Ben also estimates that room and board expenses will cost $2,000 more per year at both schools than his current expenses, payable at the beginning of each year. The appropriate discount rate is 4.7%

Questions:

1.How does Ben's age affect his decision to get an MBA?

2.What other, perhaps nonquantifiable, factors affect Ben's decision to get an MBA?

3.Assuming all salaries are paid at the end of each year, what is the best option for Ben from a strictly financial standpoint?

4.Ben believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement?

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 percent. How would this affect his decision

Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program. Ben currently works at the money management firm of Dewey and Louis. His annual salary at the firm is $65,000 per year, and his salary is expected to increase at 3 percent per year until retirement. 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 current average tax rate is 26 percent. Ben has a savings account with enough money to cover the entire cost of his MBA program. The Ritter College of Business at Wilton University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $70,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $3,000 per year. Ben expects that after graduation from Wilton, 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 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent. The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated, one-year program, with a tuition cost of $85,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,500. Ben thinks that he will receive an offer of $92,000 per year upon graduation, with an $18,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average tax rate at this level of income will be 29 percent. Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Ben also estimates that room and board expenses will cost $2,000 more per year at both schools than his current expenses, payable at the beginning of each year. The appropriate discount rate is 6.3 percent.

1. How does Ben’s age affect his decision to get an MBA?

2. What other, perhaps nonquantifiable factors affect Ben’s decision to get an MBA?

3. Assuming all salaries are paid at the end of each year, what is the best option for Ben—from a strictly financial standpoint?

4. Ben believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement?

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 percent. How would this affect his decision?

Critically analyze, how any University should price its MBA program given its dual aim of brand building and profitability by using Pricing Strategies and Program?

THE MBA DECISION

Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although Internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program.

Ben Currently works at the money management firm of Dewey and Louis. His Annual salary at the firm is $53,000 per year, and his salary is expected to increase at 3 percent per year until retirement. He is currently 28 years old and expects to work for 38 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Ben has a savings account with enough money to cover the entire cost of his MBA program.

         The Ritter College of Business at Wilton University is one of the top MBA programs in the Country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $58,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $2000 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $87,000 per year, with a $10,000 signing bonus. The salary at this job will increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent.

The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than Ritter College. Bradley offers an accelerated one-year program, with a tuition cost of $75,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,200. Ben thinks that he will receive an offer of $78,000 per year upon graduation, with an $8,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average tax rate at this level of income will be at 29%.

         Both Schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Ben has also found that both schools offer graduate housing. His room and board expenses will decrease by $4,000 per year at either school he attends. The appropriate discount rate is 5.5 percent.

Wilton MBA:

Costs:

Total direct costs = $58,000 + 2,000 + 3,000 – 4,000 = $59,000

PV of direct costs = $59,000 + 59,000 / (1.055) = $114,924.17

Salary:

PV of after-tax bonus paid in 2 years = $10,000(1 – .31) / 1.0552 = $6,199.32

After-tax salary = $87,000(1 – .31) = $60,030

Mount Perry MBA:

Cost: Total direct: $75,000 + 4,200 + 3000 – 4000 = $78,200

How to find the direct cost and salary for Mount Perry MBA?

MBA_Salary table contains the annual salaries, in thousands of dollars, earned by individuals who graduated with MBAs in 2015 and 2016 from a certain business school in Canada. We would like to determine whether the distribution of salaries for 2015 MBA graduates is higher than for 2016 MBA graduates. a) Create a boxplot and compare the distribution of salaries for 2015 and 2016 graduates. b) Perform the appropriate non-parametric test at a 5% significance level to determine whether the salary for 2015 graduates is higher than for 2016 graduates. State the hypotheses clearly and show your manual calculation for all the relevant steps in the test. c) Use Excel to perform the appropriate non-parametric test in part (b). How does the result from Excel compare with your conclusion in part (b).

THE MBA DECISION Ben Bates graduated from college six years ago with a finance undergraduate degree. Since graduation, he has been employed in the finance department at East Coast Yachts. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program. Ben’s annual salary at East Coast Yachts is $61,000 per year, and his salary is expected to increase at 3 percent per year until retirement. 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 current average tax rate is 25 percent. Ben has a savings account with enough money to cover the entire cost of his MBA program. The Ritter College of Business at Wilton University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $65,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $2,800 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $107,000 per year, with an $20,000 signing bonus. The salary at this job will increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 30 percent. The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated, one-year program, with a tuition cost of $78,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,000. Ben thinks that after graduation from Mount Perry, he will receive an offer of $90,000 per year, with a $17,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average income tax rate at this level of income will be 28 percent. Both schools offer a health insurance plan that will cost $3,500 per year, payable at the beginning of the year. Ben also estimates that room and board expenses will cost $2,500 more per year at both schools than his current expenses, payable at the beginning of each year. The appropriate discount rate is 6.2 percent. Assume all salaries are paid at the end of each year.

Salary Wilton MBA Mount Perry MBA Timeline Timeline Timeline Year Value Year Value Year Value