Assume today is March 16, 2016. Natasha Kingery is 30 years old and has a Bachelor of Science degree in computer science. She is currently employed as a Tier
2 field service representative for a telephony corporation located in Seattle, Washington, and earns $38,000 a year that she anticipates will grow at 3% per
year. Natasha hopes to retire at age 65 and has just begun to think about the future.
Natasha has $75,000 that she recently inherited from her aunt. She invested this money in 30-year Treasury Bonds. She is considering whether she should
further her education and would use her inheritance to pay for it.
She has investigated a couple of options and is asking for your help as a financial planning intern to determine the financial consequences associated with
each option. Natasha has already been accepted to both of these programs, and could start either one soon.
One alternative that Natasha is considering is attaining a certification in network design. This certification would automatically promote her to a Tier 3
field service representative in her company. The base salary for a Tier 3 representative is $10,000 more than what she currently earns and she anticipates
that this salary differential will grow at a rate of 3% a year as long as she keeps working. The certification program requires the completion of 20 Web-based
courses and a score of 80% or better on an exam at the end of the course work. She has learned that the average amount of time necessary to finish the program
is one year. The total cost of the program is $5000, due when she enrolls in the program. Because she will do all the work for the certification on her own
time, Natasha does not expect to lose any income during the certification.
Another option is going back to school for an MBA degree. With an MBA degree, Natasha expects to be promoted to a managerial position in her current firm. The
managerial position pays $20,000 a year more than her current position. She expects that this salary differential will also grow at a rate of 3% per year for
as long as she keeps working. The evening program, which will take three years to complete, costs $25,000 per year, due at the beginning of each of her three
years in school. Because she will attend classes in the evening, Natasha doesn’t expect to lose any income while she is earning her MBA if she chooses to
undertake the MBA.
Sample Solution
