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The True Value of YOUR MBA

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Re: The True Value of YOUR MBA [#permalink]

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New post 27 May 2008, 08:23
very helpful! thanks!
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New post 27 May 2008, 08:30
Good spreadsheet, though it makes me feel sad. My breakeven point is a long way off :(
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New post 27 May 2008, 09:15
great model. i had set up a similar one before applying but yours is even more detailed.

the only thing i would add is that these types of models have a difficult time incorporating option value. there's obvious option value in completing an MBA program and getting a job you otherwise would not have been able to get, but there is a lot of "unknown" option value as well. to the extent that you meet the right people and get connected into amazing opportunities, so much the better. my point is that if the model is close on an after cost basis (as might be the case if you are not an aspiring finance baller), it's probably worth rolling the dice if you can get into a good school -- you never know what might come your way.
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New post 17 Jul 2008, 20:14
thanks for providing this.
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New post 18 Jul 2008, 08:11
Ryguy,

Great tool, very comprehensive!

Thanks!

~Sam
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New post 18 Jul 2008, 13:58
great tool! How you would suggest us PT'ers edit it to make our situation reflect the results!

Either way, +1!!
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Re: The True Value of YOUR MBA [#permalink]

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New post 18 Jul 2008, 16:30
1
zakk wrote:
great tool! How you would suggest us PT'ers edit it to make our situation reflect the results!

Either way, +1!!


Great question, perhaps something that I can work on for Version 2.0. :)

I think the easiest way would be to manually override the cash flows for the first three years. For instance, the average full-time MBA does not have any income in Yr 1 and Yr 2 (with the exception of an internship), so his/her cash flow is negative and simply the amount of tuition. In your case, your tuition will be offset by your income (sweet!), so you will have positive cash flow in those years (salary - tuition + any company reimbursement = cash flow). You can use that as a starting point for your years 1 and 2. The other adjustment that you will need to make is for "salary upon graduation." I assume that the PT program is three years, instead of two, so you will need an override adjustment in year 3 (again, this is the aforementioned formula). From there it should work, since the stages are set up to increase your salary by the percentage that you designate.

Hope that helps. Let me know if you have any more questions or would like some clarity on this.
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New post 20 Jul 2008, 16:44
great tool! +1!
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New post 20 Jul 2008, 18:34
yikes, 6-7 years to recoup my investment in the best case scenario. Anybody want to try making an argument about how pursuing an MBA has significant intangible value not reflected in ryguy's mad awesome spreadsheet? :?

Certainly puts a lot of things into perspective.
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New post 21 Jul 2008, 16:44
solaris1 wrote:
yikes, 6-7 years to recoup my investment in the best case scenario. Anybody want to try making an argument about how pursuing an MBA has significant intangible value not reflected in ryguy's mad awesome spreadsheet? :?

Certainly puts a lot of things into perspective.

First off, hopefully you are also looking to enter a field that in some way you will find more enjoyable post-mba. That is some of the intangible value. Then, on the financial side you need to consider the spreadsheet is the average number. You will do better or worse than this, but will almost certainly not hit the exact number. The big thing here is,as "Sudden" said above:
"the only thing i would add is that these types of models have a difficult time incorporating option value"
I found this very well stated - Option value is very tough to predict. Basically, while not necessarily likely, you have a vastly increased chance of doing something that will make you filthy rich.

I think that sums up the 2 main intangibles - did I miss any?
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New post 23 Jul 2008, 12:46
Great spreadsheet ryguy! Haven't had a chance to really pour into it but looks like a fun tool.

I would like to add a potential question to those that are trying to calculate a precise ROI using this model. How does tax-affecting cash flows change the end result of your calculations? I'm not sure if the impact will be material or not but I'm looking forward to playing around with the model a bit to see.
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New post 24 Jul 2008, 16:34
ryguy904 wrote:
zakk wrote:
great tool! How you would suggest us PT'ers edit it to make our situation reflect the results!

Either way, +1!!


Great question, perhaps something that I can work on for Version 2.0. :)

I think the easiest way would be to manually override the cash flows for the first three years. For instance, the average full-time MBA does not have any income in Yr 1 and Yr 2 (with the exception of an internship), so his/her cash flow is negative and simply the amount of tuition. In your case, your tuition will be offset by your income (sweet!), so you will have positive cash flow in those years (salary - tuition + any company reimbursement = cash flow). You can use that as a starting point for your years 1 and 2. The other adjustment that you will need to make is for "salary upon graduation." I assume that the PT program is three years, instead of two, so you will need an override adjustment in year 3 (again, this is the aforementioned formula). From there it should work, since the stages are set up to increase your salary by the percentage that you designate.

Hope that helps. Let me know if you have any more questions or would like some clarity on this.


Worked like a charm! Just took a bit of work.

Looks like 8 years to work mine off, but the opportunity this presents is simply too much to pass over, even if it is a year later than I'd like to start.

Thanks again!
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Re: The True Value of YOUR MBA [#permalink]

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New post 24 Jul 2008, 18:53
zakk wrote:
Worked like a charm! Just took a bit of work.

Looks like 8 years to work mine off, but the opportunity this presents is simply too much to pass over, even if it is a year later than I'd like to start.

Thanks again!


Hey Zakk,

Glad that worked. I will definitely incorporate a PT feature in the next version.

As far as *your* payback goes, there is NOTHING wrong with 8 years. The way that NPV and the time value of money works is that if you are comparing project A (or no MBA in this case)and project B (MBA), you will choose the project that has the highest NPV (which for you is earning an MBA). If it said the payback was 45 years and you are 70 years old now, well, then that would be a problem. But for any of us in our 20's or even early 30's, there is nothing wrong with an 8 year or even a 10 year payback. If you include the intangibles, which unfortunately I'm not capable of quantifying - your payback will be even sooner!

All the best,
ryguy
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Re: The True Value of YOUR MBA [#permalink]

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New post 30 Jul 2008, 15:00
+1 for you, RyGuy. Very, very helpful stuff. Must have taken quite a bit of time and effort to set this up, so much appreciated!
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New post 02 Aug 2008, 12:21
Nice spreadsheet!! Just one thing to note, your salaries are pre-tax and the tuition cost are post-tax. It may make more sense to convert tuitions cost to a pre-tax number (e.g $45K becomes 45/(1-0.40) = 75)


Crap, my breakeven is 10 years + .
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New post 03 Aug 2008, 15:14
Nice job. I did a similar exercise for my wife's medical school and physician career. Considers yourselves lucky, ladies and gentlemen, in an unspecialized medical practice (ie internal medicine), one never breaks even.

Also, I did not notice a section in this model for debt service, which would add at least a few years onto the breakeven.
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New post 03 Aug 2008, 17:19
In a 40+ year career, a breakeven point of 10 years is not bad at all! Let's say you work for 3 years, get your MBA, and then spend the next 10 years getting back to even. Then you spend the next 25 years making great money and living the good life.
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New post 10 Aug 2008, 07:20
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interesting analysis, thank you. but why you are so pessimistic about your future? growth rates look a quite low. is it really than even in 2020 (12 years ahead) you can get only 186k with MBA and 90 without? what is your country and industry? I think you should believe in yourself more!

P.S. what about taxation and inflation? do you estimate incomes after it? What about economic cycle? maybe changing career in the future?

P.S.2: My ROI is definitely very negative, but I'm not worried about it. I think education can not be measured just in money. personal effect more important and can not be measured.
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New post 12 Aug 2008, 11:45
This is a very good source of information but I think it is highly empirical,
So I have several questions and I hope somebody will address to these.

1. Does this equation holds good for all MBA program? Or only from top 15 schools from US?
2. And the break even has been calculated taking 60k as current salary. What about those cases or people who are already making more than 60K?
3. Does this calculation addresses the increased tax and expenditure due to increase in salary in future?
sorry to ask such basic or preliminary questions as I am from pure science background ( a very little idea on business and finance)
thanks all
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New post 12 Aug 2008, 12:21
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subarao wrote:
This is a very good source of information but I think it is highly empirical,
So I have several questions and I hope somebody will address to these.

1. Does this equation holds good for all MBA program? Or only from top 15 schools from US?
2. And the break even has been calculated taking 60k as current salary. What about those cases or people who are already making more than 60K?
3. Does this calculation addresses the increased tax and expenditure due to increase in salary in future?
sorry to ask such basic or preliminary questions as I am from pure science background ( a very little idea on business and finance)
thanks all

The numbers that I have plugged in are as a sample (i.e., illustrative purposes only) so that you know which data points you should enter ON YOUR OWN. As I said in my original post and in the directions tab, this is supposed to look at the value of YOUR MBA. So plug in YOUR numbers. It doesn't matter if you go to top 50 or top 5, it's all based on the assumptions that you put in. However, if you are assuming $140,000 starting salary for a top 50 school, well then "garbage in, garbage out."

Currently it does not account for taxes. The easy way to get around that is to simply enter all of your info in net tax (after tax) dollars.

And again, this is not designed to be the ultimate solution for everyone. The main point is to give you an idea what your situation looks like. If your NPV is 5 years - great. If it's 10, that's also great, since we are all concerned with the long run. Even if it's >20years, that may be OK for some people because of the intangible aspects of going to school (e.g., network, formal business education, career switch, etc.).

Hope that helps.
Re: The True Value of YOUR MBA   [#permalink] 12 Aug 2008, 12:21

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