Corporate Finance Task
Anggota Kelompok :
1. Amelia Putri (2010522010)
2. Nadya Mustafa (2320522004)
3. Ratu Fathia Rasyid (2320522032)
The MBA Decision
After graduating frim university with a finance degree. Steve Gates joins an investment
bank as an analyst. He has worked there for three years and is now considering pursuing a fulltime MBA degree at one of Singapore’s top tier universities (Nanyang Techonological University
or Singapore Management University). Steve believes that such a qualification will help him
move up to a managerial position.
Steve works as the Asset Management Department. His annual salary is S$52.000 per
years and his salary is expected to increase at 5 percent per year for 40 more years until
retirement. Steve’s remuneration package includes a base salary and a medical and dental
healthcare insurance plan. His tax rate is 20 persent.
The Nanyang Business School of Nanyang Technological University offers a one-year,
full-time MBA program. The tuition fee is S$55.000. books and other supplies are estimates to
cost around S$1.200. Steve expects to receive an offer with a remuneration package thet includes
a base salary (S$520.000 per year) and signing bonus (S$30.000), as well as a medical and dental
healthcare insurance plan. Steve expects his salary will increase by 7 percent per year. Assume
the tax rate remains at 20 percent.
The Lee Kong Chain School of Business of Singapore Managemen University also offers
a one-year, full-time MBA program. The tuition fee is S$60.990. Books and other supplies are
estimated at S$1.500. Steve expects to receive an offer with remuneration package that includes
a base salary (S$540.000 per year) and signing bonus (S$10.000), as well as a medical and dental
health care insurance plan. Steve expects his salary will increase by 6.5 persent per year. Assume
the tax rate remains at 20 percent.
Steve estimates that the living and miscellaneous expenses of both universities may cost
S$4.000. Assume the tuition fee payment at well as the additional living and miscellaneous
expenses are payable at the beginning of the term and the discount rate is 8 percent.
Questions:
1. Name some factors thet Steve should consider before he pursues his MBA study.
Factors Steve Should Consider Before Pursuing an MBA:
a. Career Goals: Steve should have a clear understanding of his career goals and
whether an MBA aligns with those goals. Consider whether the MBA will
provide the necessary skills and network to advance in his chosen field.
b. Return on Investment (ROI): Calculate the potential ROI of an MBA. Compare
the cost of tuition, living expenses, and potential lost income during the program
with the expected increase in salary after completing the MBA.
c. Program Reputation: Research the reputation of the MBA programs he's
considering. Factors like rankings, faculty, alumni network, and internship
opportunities can significantly impact the value of the degree.
d. Financial Situation: Assess his financial situation, including savings, scholarships,
and potential loans. Determine whether he can afford the program and how it may
affect his overall financial health.
e. Location: Consider the location of the MBA program and how it may impact his
personal life and career opportunities. Some locations may offer better access to
specific industries or job markets.
f. Networking Opportunities: Evaluate the networking opportunities the MBA
program provides. Building relationships with classmates, alumni, and industry
professionals can be valuable for future career prospects
2. Assume all salaries are paid at the end off each year: evaluate the best options for steve
To evaluate the best options for Steve, we would need specific financial data, such
as tuition costs, expected salary increases with an MBA, and the interest rates on any
potential loans. Without this information, it's challenging to provide a precise answer.
However, generally, Steve should compare the present value of his future cash flows with
and without an MBA to determine which option is financially superior. The option with
the higher present value would be the better choice.
3. Steve understands that he may give up a lot to pursue his MBA degree. He is now
considering whether to stay with the investment bank.
a. Calculate the salary that Steve may receive that make no difference in attending
Nanyang Technological University. At what remuneration amount wouls Steve be
indifferent to in either continuing hia job or attending Nanyang Technological
University?
3. Steve understand that he may give up a lot to pursue his Mba Degree. He now
considering whether to stay with the Investment bank.
A. For Nanyang Business School of Nanyang Technological University, some
consideration are :
Remuneration Package : Base Salary + Signing Bonus (S$ 550.000 in total)
Expectation Salary Rise : 7 % a year
Tax rate : 20 %
Book and Tuition fee : S$ 56.200 in total
Living Cost : S$ 4.000 (Discount Rate 8%, S$ 3.680)
From the information, we can conclude that Remuneration Present Value are :
S$ 550.000 - S$ 56.200 - S$ 3.680 = S$ 490.120
By applying the formula : FV = PV (1 + i)t, we can gain an insight about the
future value of the Remuneration Package, which is :
FV = S$ 490.120 (1 + 0.07)1
FV = S$ 1.014.548,40
Another consideration are Tax Rate, which describe as 20 %, so the Future Value
of the Remuneration Package would be :
FV = S$ 1.014.548,40 - (0.20 x S$ 1.014.548,40)
FV = S$ 811.638,72
Meanwhile, If Steve Decide to keep his jobs, based from information his Future
Value would be :
Salary : S$ 624.000
Expectation Salary Rise : 5 % a Year
Tax Rate : 20 %
FV = S$ 624.000 (1 + 0.05)1
FV = S$ 1.279.200
Another consideration are Tax Rate, which describe as 20 %, so the Future Value
of Jobs would be :
FV = S$ 1.279.200 - (0.20 x S$ 1.279.200)
FV = S$ 1.023.360
If Steve Decide to pursue the degree here, he should consider the gap in Future
Value which is S$ 211.721,28
b. Calculate the salary that steve may receive that makes no difference in attending
Singapore Management University?
For Lee Kong Chian School of Business of Singapore Management University, Some
consideration are :
Remuneration Package : Base Salary + Signing Bonus (S$ 550.000 in total)
Expectation Salary Rise : 6.5 % a year
Tax rate : 20 %
Book and Tuition fee : S$ 62.490 in total
Living Cost : S$ 4.000 (Discount Rate 8%, S$ 3.680)
From the information, we can conclude that Remuneration Present Value are :
S$ 550.000 - S$ 62.490 - S$ 3.680 = S$ 483.830
By applying the formula : FV = PV (1 + i)t, we can gain an insight about the future
value of the Remuneration Package, which is :
FV = S$ 483.830 (1 + 0.065)1
FV = S$ 999.108,95
Another consideration are Tax Rate, which describe as 20 %, so the Future Value of
the Remuneration Package would be :
FV = S$ 999.108,95 - (0.20 x S$ 999.108,95)
FV = S$ 799.287,16
Meanwhile, If Steve Decide to keep his jobs, based from information his Future Value
would be :
Salary : S$ 624.000
Expectation Salary Rise : 5 % a Year
Tax Rate : 20 %
FV = S$ 624.000 (1 + 0.05)1
FV = S$ 1.279.200
Another consideration are Tax Rate, which describe as 20 %, so the Future Value of
Jobs would be :
FV = S$ 1.279.200 - (0.20 x S$ 1.279.200)
= S$ 1.023.360
If Steve Decide to pursue the degree here, he should consider the gap in Future Value
which is S$ 224.072,84
FOR STEVE TO BE INDIFFERENT TO PURSUE HIS DEGREE,
REMUNERATION SHOULD BE AT LEAST BETWEEN S$ 675.000 TO S$
700.000 WITH 7 % EXPECTED RATE. HERE THE FUTURE VALUE OF THE
PROPOSED NUMBER S$ 675.000 :
FV = S$ 675.000 (1 + 0.07)1
FV = S$ 1.273.298,40
Another consideration are Tax Rate, which describe as 20 %, so the Future Value of
the Proposed Number are :
FV = S$ 1.273.298,40 - (0.20 x S$ 1.273.298,40)
FV = S$ 1.018.638
FOR FUTURE VALUE OF S$ 700.000 :
FV = S$ 700.000 (1 + 0.07)1
FV = S$ 1.325.048,40
Another consideration are Tax Rate, which describe as 20 %, so the Future Value of
the Proposed Number are :
FV = S$ 1.325.048,40 - (0.20 x S$ 1.325.048,40)
FV = S$ 1.060.038,72