Personal Investment OptionsScenario 1Scenario 2The Bachelor’s DegreeThe Master’s DegreeComparison: Education Cost and TimeComparison: Entry-Level JobsSlide 8Slide 9Slide 10Slide 11Slide 12Slide 13ResourcesPersonal Investment OptionsHigher Education:Bachelor’s vs. Master’sTeam 8Jade Thiemsuwan – OrganizerNicholas Sakamoto – TechieAndy Yau – SummarizerMarkel Vessup - SummarizerEGR403: Asset Allocation and Technical Decision MakingScenario 1Tom, a 22-year old graduating Chemical Engineer at Cal Poly Pomona chooses to go straight to work after his Bachelor’s Degree. He graduates with good standing and has a great attitude and work ethic.Scenario 2Jerry, a 22-year old graduating Chemical Engineer at Cal Poly Pomona chooses to pursue a Master’s Degree immediately after his Bachelor’s Degree. He graduates with good standing and has a great attitude and work ethic.The Bachelor’s DegreeCost of tuitionTimeJob advancementJobs after retirementSalaryThe Master’s DegreeCost of tuitionTimeJob advancementJobs after retirementSalaryComparison: Education Cost and TimeBachelor’s$19200 – 4 yearsMaster’s$19200 – 4 Years AND$73400 – 2 Years Total: $92600 6 YearsComparison: Entry-Level JobsBachelor’sEntry-Level Associate Engineer$57361Master’sEntry-Level Associate Engineer$68561Difference of: $68561 – $57361 = $11200Comparison: Job OpportunityBachelor’sAssociate to PrincipleMaster’sUp to Manager/DirectorPost-retirement careersSpreadsheet parametersMajor spreadsheet base-case parameters include: Bachelor MasterStartingSalary $59,361 $68,561AnnualSalaryIncrease 3.0% 4.0%401kAnnualROR 6.0% 6.0%RetirementAge 62 62Annualsavings 10% 10%CompanyMatchContribution 6% 6%SamePromotionSchedule - -Analysis Assumptions• Based on testimonies from industry, the promotion schedule for a chemical engineer with a bachelor or master’s degree does not differ. e.g. 2 yr, 5yr, 10yr, etc.• The engineer with the Master’s degree does not surpass management level. e.g. not CEO or President, etc.• No initial sign-on bonuses have been accounted for• Savings plan assumes only a 401k. e.g. No IRA, etc.Analysis Results• The Master’s Degree does (and should) make more in total savings by age 62• However, the Bachelor behind by $604,000 (about 16%)• Our sensitivity shows that little needs to be done for the Bachelor to save the equivalent amount by retirementSensitivity AnalysisPercent SavedPercentSaved TotalSavings10.00% $3,789,664.5710.50% $3,908,091.5811.00% $4,026,518.6011.50% $4,144,945.6212.00% $4,263,372.6412.50% $4,381,799.6613.00% $4,500,226.67Different 401k Plan401kRateofReturn TotalSavings6.00% $3,789,664.576.15% $3,916,263.876.30% $4,047,900.326.45% $4,184,788.386.60% $4,327,151.936.75% $4,475,224.63Company Contribution (still 10% Savings)CompanyPercentTotalSavings6% $3,789,664.577.00% $4,026,518.608.00% $4,263,372.649.00% $4,500,226.67Sensitivity AnalysisAnnual Increase in Percentage SavedIncreaseFinalYear%SavedTotalSavings0.00% 10.00% 0.05% 12.00%$4,000,745.560.10% 14.00%4211826.550.15% 16.00%$4,422,907.55Increase in Annual Income GainAnnualIncomeGain TotalSavings3.00% $3,789,664.573.20% $3,904,185.293.40% $4,023,744.063.60% $4,148,597.273.80% $4,279,015.304.00% $4,415,283.29ResourcesUnited States Bureau of Labor and Statistics 2007$59,361 Bachelor’s$68,561 Master’sTestimonies1. ~$57000 Bachelor’s ~$65000 Master’s 2. ~$60000 Bachelor’s ~$65000 Master’sChemical Engineering & News' 2006 $67,200 Bachelor’s$79000 Master’sEngineer Salary.com 2008$67,504 Bachelor’s$71,028
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