jasmine works in sales but is considering quitting work for 2 years to earn an MBA. Her currrent job pays $40,000 peryear (after tax),but she could earn $55000 per year if she had her master of business admin. Tuition fees is $10000 per year. Jasmine's discount rate is 6% per year. she just turned 48 and plans to retires when she turn 60. whether or not she gets her MBA??should she go to school to earn her MBA?

To determine whether Jasmine should go to school to earn her MBA, we need to analyze the financial impact of this decision on her future earnings and retirement savings. Here are the steps to calculate and compare the options:

1. Calculate the total earnings over the next 2 years without the MBA:
Current job annual salary: $40,000 (after tax)
Total earnings without the MBA: $40,000 x 2 = $80,000

2. Calculate the total earnings over the next 2 years with the MBA:
MBA job annual salary: $55,000 (after tax)
Total earnings with the MBA: $55,000 x 2 = $110,000

3. Calculate the total cost of tuition fees over the next 2 years:
Tuition fees per year: $10,000
Total tuition fees for 2 years: $10,000 x 2 = $20,000

4. Calculate the net earnings by subtracting tuition fees from total earnings for each option:
Net earnings without the MBA: $80,000 - $20,000 = $60,000
Net earnings with the MBA: $110,000 - $20,000 = $90,000

Now let's consider the impact of the discount rate and Jasmine's retirement plans.

5. Calculate the present value of net earnings for each option:
The present value formula for a future cash flow is given as: PV = (FV) / (1+r)^t
Where PV is the present value, FV is the future value, r is the discount rate, and t is the time period.

PV without the MBA = $60,000 / (1 + 6%)^12 (from age 48 to 60)
PV with the MBA = $90,000 / (1 + 6%)^12 (from age 48 to 60)

6. Compare the present values to determine which option is better:
If PV with the MBA > PV without the MBA, then Jasmine should go to school for her MBA.

By following these steps, you can calculate the present values and compare the options to determine whether Jasmine should go to school to earn her MBA.

To determine whether Jasmine should go to school to earn her MBA, we need to compare the present value of her potential income streams with and without the MBA.

Without MBA:
Jasmine's current job pays $40,000 per year (after tax). Assuming she continues working until she retires at age 60, she will work for 12 more years.
The present value of her income without the MBA can be calculated using the formula for the present value of an ordinary annuity:

PV = PMT × [(1 - (1 + r)^-n) / r]

Where:
PMT = annual income without the MBA = $40,000
r = discount rate = 6% = 0.06
n = number of years = 12

PV = $40,000 × [(1 - (1 + 0.06)^-12) / 0.06]
= $40,000 × (1 - 0.485071) / 0.06
= $269,872.16

With MBA:
If Jasmine gets her MBA, she could earn $55,000 per year (after tax). However, she would have to pay tuition fees of $10,000 per year.
Jasmine plans to study for 2 years, after which she will work for 10 more years before retiring at age 60. Therefore, she will have 10 years of increased income with an MBA.

The present value of her income with the MBA can be calculated by subtracting the net tuition fees from the increased income and then calculating the present value using the same formula as above:

PMT = annual income with the MBA = $55,000 - $10,000 = $45,000
n = number of years = 10

PV = $45,000 × [(1 - (1 + 0.06)^-10) / 0.06]
= $45,000 × (1 - 0.558394) / 0.06
= $319,658.33

Considering the present value of both income streams, we find that the present value of the income with the MBA is higher than the present value of the income without the MBA.

Therefore, based on the given information and assuming a discount rate of 6% per year, Jasmine should go to school to earn her MBA, as it is expected to have a higher present value of income compared to her current job.