Xin Jang graduated from university six years ago. He will do MBA. After examining schools, he has narrowed his choice to either Atacama University or the University of Ladoo. Both schools encourage internships, but to get class credit for the internship, no salary can be accepted. Other than internships, neither school allows its students to work while enrolled in its MBA program. Xin currently works at the money management firm of Puss and Cun. His annual salary at the firm is $55,000 and his salary is expected to increase at 3 percent per year until retire ment. 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. Xin has a savings account with enough money to cover the entire cost of his MBA program at Autmn School of Business at Atacama 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 $63,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $2,500 per year. Xin expects that after graduation from Assiniboine, he will receive a job offer for about $98,000 per year, with a $15,000 signing bonus. The salary at this job wlll increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent. The Populp School of Business at the University of Ladoo began its MBA program 16 years ago. The Populp School is smallerand less well known than the Autmn School. It offers an accelerated one-year program, with a tuition cost of $80,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $3,500. Xin thinks that he will receive an offer of $81,000 per year upon graduation, with a $10,000 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 $300 per year, payable at the beginning of the year. Xin also estimates that room and board expenses will cost $20,000 per year at both schools. The appropriate discount rate is 6.5 percent.
1. How does Xin's age affect his decision to get an MBA?