Consider the following scenario and answer the questions that follow Nabih is a Lebanese young man graduated from the American University of Beirut (AUB) years ago with accounting and finance undergraduate degree. With his current jobs officer cards & acquiring operations in the operations department at Arab Investment Company (ATC) in Qatar, he is happy and satisfied. However, he has a dream, and his dream to become a banker at the Qatar National Bank (ONB), one of the top banks in Doha, Qutare feels that an MSc (master of science) in finance would enrich his knowledge in the field and allow him to achieve this goal. After examining different universities, he has mantowed down his choice to either University of Delaware in the US or Toulouse Business School in France. Both schools do not allow its students to work while wolled in its MSc programme. but may consider work experience as part of the application process Nabih annual salary at the company is $75,000 and this is expected to increase at 3 per cent per year until retirement. He is currently 28 years old and expects to work for 35 more years. His current job at the AIC includes a fully paid health insurance plan, and his current average ter rate is 50 per cent. Nahih has a savings account with enough money to cover the entired of his MSc programme The Business School at University of Delaware is one of the top MSc programmes in the US The MSc degree requires two years of fall-time enrolment at the university. The analitice cost is $60,000, payable at the beginning of each school year Books and other supplies are estimated to cout $2.500 per year. Nahh expects that after graduation from University of Delaware, he will receive a job offer for about $125.000 per year, with a $25,000 signing bonus The salary at this job will increase at 4 per cent per year. Because he will be working in the US, his average income tax rate will also be at 50 percent The Toulouse Business School began its MSc programme 16 years ago. It is and less well known than the University of Delaware, however the school offers an accelerated one year programme, with a tuition cost of $75,000 to be paid upon matriculation Books and other supplies for the programme are expected to cost $3.500. Nabih thinks that he will receive offer of S92,000 per year upon graduation, with a $10,000 ming bonus. The salary at this job will increase at 35 per cent per year, Because he will be working in France, Naseng tax rate at this level of income will be 41 per cent. Both schools offer a discounted health insurance plan that will cod 3.000 per year pable the beginning of the year. Nabihase estimates accommodation, and life expenses including stipend will cost $20.000 per year at either school Questions:
1. Why does Nabih wants to pursue an MSc degree!
2. How does Nabil’s age affect his decision to get an MS!
3. What factors (measurable or non-measurable could affect Nahin’s decision to get an MSC!
4. If Nabih receives all his income at the end of each year, how many pes dhe have? What would be the best option for him from a financial management point of View Nabih believes that the appropriate analysis is to calculate the future value of ach option. How would you evaluate this statement comment?
6. What initial salary would Nabih need to receive to make him indifferent between attending University of Delaware and staying in his curent position
7 Seppose, instead of being able to pay cash for his MSc. Nabh must be the money. The current borrowing rate is 5.4 percent. How would this affect his decision Assumptions hints
1. The appropriate discount rate is 65 per cent.
IL Assume tax rate in Qatar and the US are identical
III. Consider income after tax unlea you want the salary before tax for companie
IV. Consider costs and benefits together
V. Salary can be seen as an annuity with a growth rate or growing any last for from chapter 4). PV —-|