Friday, October 14, 2011

How much is your MBA worth?

The latest ranking of MBAs by The Economist is accompanied by a simple summary of the impact on income, tuition fees and completion time for the top twenty.

It raises the simple question of "is the MBA worth it". For the analysis below I've made the following assumptions.
* The starting salary (salary at graduation less the percentage increase) would have been salary in perpetuity without study.
* The starting salary is income foregone for the duration of study (note this could be adjusted to add a variable number of months to gain post-study employment)
* The post graduation salary is salary in perpetuity after graduation.
* Total investment is salary foregone plus tuition fees (it might also need to include travel fees and a marginally increased accommodation cost).
* The benefit of the study is the salary increase.
* The total costs are incurred at the end of the study period.
* The discount rate is a bank rate (in Australia) that the individual could have earned on their investment, not what it would cost to borrow it.

The table below then lists the breakeven period in years from studying the MBA;

School             Breakeven (Years)
Dartmouth       4.739753219
Chicago          7.099505598
IMD               2.38168461
Virginia           5.229798065
Harvard          6.226036989
Haas               6.012883336
Columbia        6.691201258
Stanford         5.634683547
York              2.201795183
IESE              2.314012985
MIT Sloan     6.221474851
New York     4.934890324
London          4.234646527
HEC Paris      1.801230378
Penn Wharton 6.147176899
Carnegie Mell. 5.233258692
ESADE          2.193307709
NW Kellog     6.443697885
INSEAD        4.23724441
Duke              4.430517136

(analysis available here)

This doesn't take into account other "opportunity costs" (or benefits) of locking yourself away (or networking).  But I think I know why I never bothered.

Novae Meridianae Demetae Dexter delenda est


Vic N said...

unless you get someone to pay for it while you do it part time......

Vic N said...

almost all my classmates here in singapore - an amazingly international bunch - were doing the MBA to change their careers.......they felt they were "stuck" and wanted to move sideways, segue, into something there was the psychological value......