Question
application 3: How much is an MBA worth? Assume that you were earning $40,000/year before entering program and that tuition costs are $16000/year. Expected salary
application 3: How much is an MBA worth? Assume that you were earning $40,000/year before entering program and that tuition costs are $16000/year. Expected salary is $ 54,000/year after graduation. You can invest money at 8%. For simplicity, assume that the first payment of S16,000 has to be made at the start of the program and the second payment one year later PV Of Cost Of MBA-$16,000+ 16,000/1.08 + 40000 * PV(A,8%,2 . years) $102,145 Assume that you will work 30 years after graduation, and that the salary differential ($14000-$54000-$40000) will continue through this period. * PV of Benefits Before Taxes # $14,000 * PV(A,8%,30 years)-$157,609 . This has to be discounted back two years - $157,609/1.082 $135,124 The present value of getting an MBA is $135,124-S102,145 $32,979 th Some Follow-up Questions I. How much would your salary increment have to be for you to break even on your MBA? 2 Keeping the increment constant, how many years would you have to work to break even?
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