P10-11 Jenny Jenks has researched the financial pros and cons of entering into a 1-year MBA

| June 12, 2016

Question
P10-11

Jenny Jenks has researched the financial pros and cons of entering into a 1-year MBA program at her state university. The tuition and books for the master’s program will have an up-front cost of $50,000. If she enrolls in an MBA program, Jenny will quit her current job, which pays $50,000 per year after taxes (for simplicity), treat any lost earnings as part of the up-front cost). On average, a person with an MBA degree earns an extra $20,000 per year (after taxes) over a business career of 40 years. Jenny believes that her opportunity cost of capital is 6%. Given her estimates, find the net present value (NPV) of entering this MBA program. Are the benefits of further education worth the associated costs?

Please provide your own work. Thanks!

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