Betsy Bantam debates whether or not to obtain an MBA. Regardless if she returns to school...

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Betsy Bantam debates whether or not to obtain an MBA. Regardless if she returns to school or not, after ten more years she will retire. Assume the interest rate is 5%. If Betsy does not get the MBA, then she works at her current job for ten more years (beginning next year) at a salary of $55,000. If Betsy gets an MBA, then she goes to school for two years beginning next year. After graduating with her MBA degree, Betsy obtains a higher salary of $100,000 for eight years following her completion of the MBA. Tuition in school costs $70,000 per year, but Betsy obtains a partial scholarship of $10,000 per year. Should Betsy get an MBA or not? Explain how you know. d. A firm has three investment opportunities: Time: 0 1 Cash Flow Project A Project B Project C -30 -100 -60 0 60 56 2 20 60 56 3 ننا 45 60 0 The firm has $100 in retained earnings to invest, but the firm is capital constrained and cannot borrow any additional funds this year. Note that the firm cannot complete part of a project, and it cannot pursue any project more than once, but it could pursue multiple projects. Due to the different levels of risk, each of the two projects has a different cost of capital: the cost of capital for projects A, B, and C are 5%, 6%, and 7% respectively. What should the firm do? Explain. Betsy Bantam debates whether or not to obtain an MBA. Regardless if she returns to school or not, after ten more years she will retire. Assume the interest rate is 5%. If Betsy does not get the MBA, then she works at her current job for ten more years (beginning next year) at a salary of $55,000. If Betsy gets an MBA, then she goes to school for two years beginning next year. After graduating with her MBA degree, Betsy obtains a higher salary of $100,000 for eight years following her completion of the MBA. Tuition in school costs $70,000 per year, but Betsy obtains a partial scholarship of $10,000 per year. Should Betsy get an MBA or not? Explain how you know. d. A firm has three investment opportunities: Time: 0 1 Cash Flow Project A Project B Project C -30 -100 -60 0 60 56 2 20 60 56 3 ننا 45 60 0 The firm has $100 in retained earnings to invest, but the firm is capital constrained and cannot borrow any additional funds this year. Note that the firm cannot complete part of a project, and it cannot pursue any project more than once, but it could pursue multiple projects. Due to the different levels of risk, each of the two projects has a different cost of capital: the cost of capital for projects A, B, and C are 5%, 6%, and 7% respectively. What should the firm do? Explain.

Answer rating: 100% (QA)

SOLUTION To determine whether Betsy should obtain an MBA or not we need to calculate the present value of the two options and see which one yields a h... View the full answer