Jameson is a 32-year-old father of three who thought he had finally found a career. While working as an assistant manager at a local shoe store, a customer, Vijay, befriended Jameson and invited him to join his financial services firm. Excited by the new opportunity, Jameson studied, took the required exams, and became a certified financial advisor. With all the connections he had established over the years at the shoe store, Jameson started to build up a clientele. Then the credit markets froze, and his client base dried up; nobody wanted to move their assets during the down market. Luckily, Jameson had kept his position as assistant manager and now takes home $2,000 per month, but even with that, his family of five still needs an additional $400 each month to make ends meet. With bleak economic forecasts continuing through the next year and perhaps even longer, he is wondering if he should stay the course with Vijay or go back to school for a Masters of Social Work(MSW), something he has always wanted.

Over the next year, Jameson assesses only a 20% chance that he will average $400/month as a financial advisor. His net, however, would only be $300/month, as there is a $100/month charge for Vijay’s services. He assesses a 70% chance of averaging $100/month and a 10% chance of bringing in no revenue, all the while paying Vijay for services. Jameson expects the second year to be better, with a 30% chance of averaging $600/month, a 50% chance of $400/ month, and a 20% chance of $200/month. Finally, Jameson expects dividends in the third year with a 20% chance of averaging $1,200/ month, a 70% chance of $700/month, and 10% chance of $500/ month. Vijay has indicated no change in fees for the first 3 years.

An MSW takes 2 years to complete as a full-time student and would necessitate his taking out a student loan for $30,000. Upon graduation in 2 years, Jamison is nearly assured of a position with a17% chance of earning $40,000 annually, 66% chance of earning$50,000 annually, or 17% chance of earning $60,000 annually. He figures his monthly loan payment would be $175 and he would pay40% in federal and state taxes.

Structure Jameson’s decision using a decision tree. What would you recommend he do? Why?