Consider John.He is trying to decide whether or not to enter a full-time MBA program.Currently, he works for IBM as a systems analyst earning $75,000 per year.With an MBA he could transfer to IBM's finance division, starting at $110,000 per year.His wage increases as an analyst would just be at cost-of-living and would be 4% per year.His wage increases in the finance division would be 8% per year.The MBA is a two-year program and costs $15,000 per year.John's time horizon is 6 years.(Assume for simplicity that expenses are due at thestart of a year, but earnings flow in at theendof a year.)

If the market interest rate is 5%, what decision would your recommend for John based on Net Present Value calculations?

What other factors would be important for John to consider as he makes this decision?Explain.