Question: a prospective mba student earns 60000 per year in her...
A prospective MBA student earns $60,000 per year in her current
job and expects that amount to increase by 9% per year. She is
considering leaving her job to attend business school for two years
at a cost of $50,000 per year. She has been told that her starting
salary after business school is likely to be $85,000 and that
amount will increase by 13% per year. Consider a time horizon of 10
years, use a discount rate of 15%, and ignore all considerations
not explicitly mentioned here.
Assume all cash flows occur at the start of each year (i.e., immediate, one year from now, two years from now,..., nine years from now). Also assume that the choice can be implemented immediately so that for the MBA alternative the current year is the first year of business school.
What is the net present value of the more attractive choice?
Please round your answer to the nearest dollar.