value of an mba v2.0

8/11/2019 Value of an MBA v2.0

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The True Value of *YOUR* MBA (v. 2.0)

3) The models assume that tuition is paid in the year that you attend school. I realize this is an unrealistic assumption for almost everybody. Mostof us will be taking out student loans and paying them back over the course of 5, 10, or even 30 years. However, I chose to do it this way,because again, it is the conservative approach (makes your NPV and payback time for the MBA route look worse). Feel free to adjust yourmodel accordingly if wish to do so. For example, if you are going into investment banking, you could say that your tuition is $0 (or you can chooseto plug in your living expenses---again your choice) and you will pay back $20,000 in year 1, $30,000 in year 2, and $50,000 in year 3. You canmake a manual adjustment in the cell for post-MBA year 1 by tacking on a "-25000" to the formula. You would then adjust post-MBA years 2 and3 accordingly.

Created by ryguy904 2008For my friends at GMATClub

4) If you are matriculating in 2010, 2011, or another year, simply change the dates accordingly. My base assumption is for folks matriculating in2009.

1) Compensat ion upon graduation will be 50% in your first year. This assumes that you work from July - December in the year that you graduate. Again, your situation may be that you wish to go on vacation for three months and "utilize" your signing bonuses and instead start in September.Feel free to adjust accordingly.

5) I'm human, so if you find any errors, let me know and I'll correct them.

General Assumptions

6) Feel free to adjust any of the assumptions. I wanted to create a footprint that you could change as much as you like.

2) Assumptions are that you will not have any compensation in the year of matriculation. I realize this is completely unrealistic, but I did this for tworeasons. a) Some folks are short-timing it four months prior to school ( I won't name names), while others take a week off before starting. b) Thisbrings about a more conservative approach in the calculation (if you don't make any manual adjustments) in terms of when you will "breakeven."Being a conservative guy, I chose this as the default method. Have I mentioned that you can adjust things if you prefer to do so??

4) You can also include living expenses in the cell marked tuition/fees. I chose not to, since I have an S.O. that will be "helping" me with this. Myliving expenses will remain (somewhat) the same whether I'm in school or not. I won't be eating at the same restaurants, or for that matter eatingout as much, but I'll still be consuming. Furthermore, I chose to show compensation as gross compensation (not net of housing, food, livingexpenses, taxes, etc.).

1) Fill in the yellow cells. Excel will do the rest!

3) Keep in mind, this is not designed to be exact to the nearest penny. The more time that I spent creating this, the more complex the tool startedto become (for instance, I was thinking that you could choose different growth rates for your salary and your bonus--ultimately I opted for a simpler"total compensation" growth rate). I didn't want to get too crazy or too intricate where it became hard for people to follow with more than a simpleset of directions. I thought that if I had some solid data entry placeholders, you could tweak things as you thought appropriate for your givensituation. All of the formulas are there for you to play with, tweak, and adjust. If you have any questions on how to make changes based on yourcircumstances, let me know.

A couple of notes on how this spreadsheet works

2) You can choose to run either the single stage, two stage, or three stage NPV models (or all three!). It's just a matter of how intricate you wantto get with running scenarios.


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2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021Cash flows $80,000 $82,000 $84,050 $86,151 $88,305 $90,513 $92,775 $95,095 $97,472 $99,909 $102,407 $104,967 $107,591

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021Cash flows -$45,000 -$30,000 $80,000 $125,400 $131,043 $136,940 $143,102 $149,542 $156,271 $163,303 $170,652 $178,331 $186,356

Current Salary Salary/Bonus Growth Rate

2010 1-YR NPV $158,846 2010 1-YR NPV -$73,846 False 80,000$ 2.5%2011 2-YR NPV $236,555 2011 2-YR NPV $118 False2012 3-YR NPV $313,143 2012 3-YR NPV $111,598 False2013 4-YR NPV $388,627 2013 4-YR NPV $223,615 False2014 5-YR NPV $525,213 2014 5-YR NPV $336,169 False2015 6-YR NPV $536,343 2015 6-YR NPV $449,265 False2016 7-YR NPV $608,608 2016 7-YR NPV $562,905 False2017 8-YR NPV $679,830 2017 8-YR NPV $677,090 False Full-Time or Part-Time? Salary (if Part-Time MBA)2018 9-YR NPV $750,024 2018 9-YR NPV $791,825 True Full-Time 65,000$2019 10-YR NPV $819,207 2019 10-YR NPV $907,112 True

2020 11-YR NPV $887,391 2020 11-YR NPV $1,022,952 True Internship Compensation (total) Signing Bonus2021 12-YR NPV $954,592 2021 12-YR NPV $1,139,350 True 15,000$ 20,000$

Post-MBAYearly tuit ion/fees 45,000$ Starting Salary/Bonus Salary/Bonus Growth Rate

120,000$ 4.5%Discount rate 4.0%

20122013201420152016201720182019

MBA

MBA

4 Years After Graduation3 Years After Graduation2 Years After Graduation1 Year After Graduation

Value of an MBAYear

Year

No MBA

2018Breakeven Year 7 Years After Graduation

MBA

No MBA

No MBA

6 Years After Graduation7 Years After Graduation8 Years After Graduation

5 Years After Graduation


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20202021 or later 10 Years+ After Graduation



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Stage 12009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Cash flows $65,000 $68,250 $71,663 $85,000 $87,975 $91,054 $94,241 $97,539 $100,953 $104,487 $108,144 $111,929 $115,846

School School School Stage 12009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Cash flows -$45,000 -$30,000 $80,000 $127,800 $136,107 $144,954 $170,000 $175,950 $182,108 $188,482 $195,079 $201,907 $208,973

Current Salary/Bonus Stage 1 Salary/Bonus Growth Rate2010 1-YR NPV $130,625 2010 1-YR NPV -$73,846 False 65,000$ 5.0% (2010 - 2011)2011 2-YR NPV $196,881 2011 2-YR NPV $118 False2012 3-YR NPV $272,446 2012 3-YR NPV $113,732 False Year 4 (2012) Salary/Bonus Stage 2 Salary/Bonus Growth Rate2013 4-YR NPV $347,647 2013 4-YR NPV $230,077 False 85,000$ 3.5% (2013-2021)2014 5-YR NPV $471,237 2014 5-YR NPV $349,218 False2015 6-YR NPV $496,967 2015 6-YR NPV $483,572 False2016 7-YR NPV $571,089 2016 7-YR NPV $617,280 True2017 8-YR NPV $644,855 2017 8-YR NPV $750,344 True Full-Time or Part-Time? Salary (if Part-Time MBA)2018 9-YR NPV $718,266 2018 9-YR NPV $882,769 True 65,000$2019 10-YR NPV $791,324 2019 10-YR NPV $1,014,558 True2020 11-YR NPV $864,030 2020 11-YR NPV $1,145,712 True Internship Compensation (total) Signing Bonus2021 12-YR NPV $936,388 2021 12-YR NPV $1,276,236 True 15,000$ 20,000$

Post-MBAYearly tuition/fees 45,000$ Starting Salary/Bonus Stage 1 Salary/Bonus Growth Rate

120,000$ 6.5% (2012 - 2015)Discount rate 4.0%

Year 5 (2016) Salary/Bonus Stage 2 Salary/Bonus Growth Rate170,000$ 3.5% (2016-2021)


20122013201420152016

MBA

No MBA MBA

Stage 2

Stage 2

Value of an MBAYear

Year

No MBA


2 Years After Graduation1 Year After Graduation

MBA

Breakeven Year

No MBA



2016


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2017201820192020

2021 or later 10 Years+ After Graduation

6 Years After Graduation7 Years After Graduation8 Years After Graduation9 Years After Graduation


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Stage 12009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Cash flows $65,000 $66,950 $68,959 $85,000 $89,250 $93,713 $98,398 $125,000 $129,375 $133,903 $138,590 $143,440 $148,461

School School School Stage 1 Stage 22009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Cash flows -$45,000 -$30,000 $80,000 $127,200 $134,832 $160,000 $167,200 $174,724 $182,587 $200,000 $206,000 $212,180 $218,545

Current Salary/Bonus Stage 1 Salary/Bonus Growth Rate2010 1-YR NPV $129,375 2010 1-YR NPV -$73,846 False 65,000$ 3.0% (2010 - 2011)2011 2-YR NPV $193,131 2011 2-YR NPV $118 False2012 3-YR NPV $268,696 2012 3-YR NPV $113,199 False Year 4 (2012) Salary/Bonus Stage 2 Salary/Bonus Growth Rate2013 4-YR NPV $344,987 2013 4-YR NPV $228,454 False 85,000$ 5.0% (2013-2015)2014 5-YR NPV $470,781 2014 5-YR NPV $359,962 False2015 6-YR NPV $499,777 2015 6-YR NPV $492,103 False Year 8 (2016) Salary/Bonus Stage 3 Salary/Bonus Growth Rate2016 7-YR NPV $594,767 2016 7-YR NPV $624,878 True 125,000$ 3.5% (2017-2021)2017 8-YR NPV $689,300 2017 8-YR NPV $758,293 True2018 9-YR NPV $783,379 2018 9-YR NPV $898,810 True2019 10-YR NPV $877,005 2019 10-YR NPV $1,037,976 True Full-Time or Part-Time? Salary (if Part-Time MBA)2020 11-YR NPV $970,181 2020 11-YR NPV $1,175,804 True 65,000$2021 12-YR NPV $1,062,909 2021 12-YR NPV $1,312,307 True

Internship Compensation (total) Signing Bonus15,000$ 20,000$

Yearly tuition/fees 45,000$Post-MBA Starting Salary/Bonus Stage 1 Salary/Bonus Growth Rate

Discount rate 4.0% 120,000$ 6.0% (2012 - 2014)

Year 4 (2015) Salary/Bonus Stage 2 Salary/Bonus Growth Rate160,000$ 4.5% (2016 - 2017)

Year 8 (2018) Salary/Bonus Stage 3 Salary/Bonus Growth Rate200,000$ 3.0% (2019 - 2021)

20122013201420152016

MBA

MBA

4 Years After Graduation3 Years After Graduation

Breakeven Year

Value of an MBAYear

Year

No MBA

No MBA

MBA Stage 3

Stage 2 Stage 3

No MBA

2016 5 Years After Graduation

2 Years After Graduation1 Year After Graduation



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2017201820192020

2021 or later


10 Years+ After Graduation


value of an mba v2.0

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