Version 2.0 Available Now!
As the first round of admits have started to trickle in and as round 2 applicants start to submit their applications, I thought I would update this document.
For those that aren't familiar with what this is, here's the original version and the overview for your reference:the-true-value-of-your-mba-64239.html
I made a handful of changes since I created this model last summer, but below are the two major changes that I have made:1) Updated fields to incorporate internship earnings2) Ability to easily compare a part-time v. full-time MBA program (from a financial perspective)
A couple of comments and feedback that were suggested from last time that I did not specifically address (and my reasons for choosing not to do so).1) Debt service of student loans.
So here’s the deal. This model assumes that tuition is paid upfront (i.e., during school). This is unrealistic for the vast majority of folks on the board here, and probably most students in general. However, I prefer to take a highly conservative approach when it comes to figuring out when I will break even. I suppose this is a worst-case scenario (i.e., makes the payback period look longer than it should), but in my mind, I’d rather err on the side of a longer payback period than a shorter payback period.
So why does this matter when tuition is paid? It is more expensive to pay for tuition with today’s dollars than it is X years down the road. For instance, if you are on a 10-yr repayment plan paying $600 a month - $600 in today’s terms is a lot more money than it is 5, 6, or 7 years from now (and for simplicity’s sake, let’s ignore fluctuations in the value of the US dollar). If you don’t believe me, ask yourself this: Would you rather I gave you $600 today or $600 in 6 years from now. Good, I’m glad we’re on the same page.
For more detail on this, I explain this in general assumption #3 on the Instructions worksheet. In that section, I’ve also included instructions for a scenario that could be applicable for folks that go into investment banking, private equity, or any other very high paying post-MBA job.2) Taxes.
I received some comments saying that tuition is paid with after-tax dollars, but salary is listed in before tax dollars. Sure, fair enough. If you think that it is appropriate to adjust for this, multiple your salary by (1 minus your expected tax rate) and plug that in for your post-grad salary. I chose not to do this for the base case scenario, but again, I’ve tried to make this model flexible enough where you can put in whatever assumptions YOU think are appropriate.
Updated directions are included on the first worksheet of the excel file. Let me know if you have any questions. I’ll be happy to address any issues/comments that may be related to your particular circumstances. Also, if you think there are any improvements that could be made to this for future versions, I’ll see what I can do to incorporate them. And again, I'm human, so if you find any errors, let me know and I'll correct them. Enjoy and let me know what you think.
The True Value of YOUR MBA: 103-t64239
GMATClub's Unofficial Chartered Financial Analyst thread: 103-t63245
How Much Weight Does the CFA Carry with Admissions: 103-t68059