Question
Kim is trying to decide between two full-time admissions offers from prestigious MBA 2-year programs. She is considering an in-state university and a top-tier private
Kim is trying to decide between two full-time admissions offers from prestigious MBA 2-year programs. She is considering an in-state university and a top-tier private university. She had decided that both programs will offer her an excellent education and provide great career prospects after graduation. However, the cost differences are significant, and she really wants to avoid being in major debt after her MBA. Kim wants to base her decision primarily on the quickest payback period for her MBA education.
Table 1 shows the annual costs for the two programs next year.
Program Costs Per Year | Mid-Tier Program | Top-Tier Program Tuition |
Tuition | 21,500 | 74,700 |
Room & Board | 18,000 | 36,300 |
Kim is not sure which career path she wants to pursue, but she also understands that her career options and starting salary will likely depend on her performance in the program. She is confident that she can earn at least a 3.25 GPA with a probability of 60%. She feels there is a 25% probability she could reach 3.50 GPA and only a 15% chance she will earn a 3.75 GPA or higher.
Based on the MBA program websites, the average starting salaries are presented in Table 2. Kim knew from Career Services at these Programs that students who earn a GPA of around 3.50 will see offers at the mean salary number. But if students have a GPA closer to 3.25 then salary offers are around 5% below the mean. And students who earn a 3.75 or higher GPA are likely to see offers as high as 15% above the mean.
TABLE 2: Average Starting Salaries Based on Career Path
Career Path | Mid-Tier Program | Top-Tier Program Tuition |
Consulting | 108,909 | 152,000 |
Finance / Accounting | 93,666 | 174,000 |
Supply Chain / Operations | 94,833 | 138,000 |
Marketing / Sales | 99,979 | 112,000 |
Kim also learned from Career Services that students graduating with higher GPAs were more likely to pursue Consulting and Finance careers. Career Services provided her with the information in Table 3 indicating which career paths students are likely to pursue based on the final GPA. Although Kim preferred a career in Marketing, she was intrigued by the other areas especially since starting salaries were much higher for Consulting and Finance offers.
TABLE 3: Percentage of Students Pursuing Different Careers Based on GPA
Career Path | 3.75 GPA | 3.50 GPA | 3.25 GPA |
Consulting | 35% | 28% | 10% |
Finance / Accounting | 30% | 26% | 35% |
Supply Chain / Operations | 20% | 23% | 35% |
Marketing / Sales | 15% | 22% | 20% |
If Kim knew that her final GPA was 3.75, then how would that impact the breakeven point for the two programs?
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