Personal Investment Options Benefit Analysis of Obtaining a PhDScenario OverviewSlide 3Scenario AssumptionsAnalysis TechniquesPhD OptionPhD OptionSlide 8No PhD OptionSlide 10Sensitivity Analysis: PhD – Response of Earnings to 5% salary inc yearlySensitivity Analysis: PhD – Response of PhD to 4% Inc in salary savingsSensitivity Analysis: No PhD – Response of Savings to a higher interest rateTHE ENDPersonal Investment OptionsBenefit Analysis of Obtaining a PhDEGR 403 Team 5Jon Estanislao, Fady Mina Muhammad Rahman,Oscar VillaScenario OverviewMAIN GOAL: To determine how beneficial it is it to receive a PhD?Examine 2 career paths - Work for a single engineering company until retirement- Work for a company while obtaining a PhD. Retire early from industry and work as a professor for a university.Scenario OverviewOption 1 (no PhD):$89,742 starting at beginning of analysisWill work 30 more years till retirementAfter retirement the engineer will live off his savings and pension.Option 2 (PhD):Pursue PhD for 3 years - Receive stipend of $25,000/yrReturning salary $105,938Will work industry until 55 (22 more years)Work for a university for 10 years - Starting salary $65,000Scenario AssumptionsInflation rate is 3.5%Salary increase is 2% / yrInterest rate on savings is 8%Analysis TechniquesFuture Worth Analysis - To calculate the future worth of salary, savings and pension. - Enable to compare earnings equivalently.Uniform Annual Payment - Determine the equivalent retirement payment amounts received. Sensitivity Analysis - To determine how affected results are to changePhD Option Work Earnings for PhD$-$20,000.00$40,000.00$60,000.00$80,000.00$100,000.00$120,000.00$140,000.00$160,000.00$180,000.0030 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55Y ears• First 3 years are stipend pay - $25,000• From age 33 – 55 working industry w/ salary increase of 2% / year - Returning salary: $105,938 - Ending salary: $163,778PhD OptionUniver. & work pension$-$20,000.00$40,000.00$60,000.00$80,000.00$100,000.00$120,000.00$140,000.00$160,000.0056 57 58 59 60 61 62 63 64 65Y ears• Working for University from age 56 – 65 - University Salary: $65,000• At age 60 pension payments from industry begin - Pension payment: $72,062 - Salary from 60 – 65: $ 137,062PhD OptionLife earnings$-$20,000$40,000$60,000$80,000$100,000$120,000$140,000$160,000$180,00030323436384042444648505254565860626466687072747678808284YearsSalary earned (Pension & Savings)• Complete Retirement from work force at 66- Industry Pension: $72,062- University Pension: $13,000 - Savings uniform payment (20 yrs): $17,680- Total Retirement compensation: $102,742 / yrNo PhD OptionOnly salary for masters and P.H.D Vs age$-$50,000.00$100,000.00$150,000.00$200,000.003 03 33 63 94 24 54 86 05 35 65 9AgeO n l y s a l a r y fo r m a s te r s a n d P .H . DSalary for masters degree Salary for P.H.D degree• No PhD starting salary: $89,742-2% / yr salary inc-Ending Salary: $165,806• Salary Difference: No PhD makes $354,357.27 moreNo PhD Option• At age 66 when both options are in retirement - When both retired no PhD will be receiving $106,133.28 / year• No PhD receives a total of $67,820.40 more during retirement.Sensitivity Analysis: PhD – Response of Earnings to 5% salary inc yearlyWith a 5% inc in salary the PhD makes a total of $720,506.46 more.If Masters Degree starts with a salary of $94,742 instead of $89,742 the PhD with a 5% inc in salary still makes $475,718 more in total.Sensitivity Analysis: PhD – Response of PhD to 4% Inc in salary savings With a 4% inc in salary saved the PhD makes a lifetime total of $105,375 more.Sensitivity Analysis: No PhD – Response of Savings to a higher interest rateIn total the Masters make $9,158 more then the PhD in life time earnings.THE
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