Business
Instruction:
The Decision-making Context:
With the birth of Corey Jemison’s third child, he and his wife are faced with a drastically increased amount of housework and increased financial stress. To ease the stresses of both, the couple must make some adjustments to work and life. Here is some information regarding Corey’s career and life choices.
Two years ago, Corey bought a truck for $35,000 to offer delivery services. Corey earns $40,000 a year operating as an independent trucker and works for about 50 hours a week.
Now he has an opportunity to sell his truck for $18,750 and goes to an MBA program for a tuition cost of $30,000. He can take a loan from a local bank to pay for his tuition at an interest rate of 6%, payable in 10 years after graduation with equal monthly installments. If he completes his MBA degree, he can find a position that pays him in the range of $80,000 to $100,000 a year as a shipping company manager, working 60 hours a week.
Alternatively, he can sell his truck and take a position now as an instructor in a truck driving school. The instructor position pays $31,250 a year for working 40 hours per week.
Another possibility is that he can sell his truck and become a stay-at-home dad taking care of his three children, spending quality time with his family members. This allows him to save about $10,000 in childcare costs per year. By selling his truck, Corey will invest the proceeds of the sale in bonds that pay a 12 percent return.
Question 2:
What are the relevant costs and relevant revenues that Corey can factor into his decision-making here? Write down both the names and the dollar amount. Please write down as many as you can identify.
Your answer:
Relevant Revenue
Name Dollar Amount
Relevant Cost
Name Dollar Amount
What are the opportunity costs if Corey chooses to (1) stay at home, or (2) goes for MBA and quits current job? Please write down as many as you can identify.
Your answer:
If he stays at home:
If he goes for MBA and quits current job:
Question 4:
Currently, you have only considered the financial factors in the different options. What are the potential problems with this? What are the constraints you can think of if Corey makes his choice based only on financial considerations? If there are no constraints, write “none”. Otherwise, list and name all constraints you can identify.
