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The MBA Decision: Current Position

The document compares the costs and benefits of pursuing an MBA degree from two schools, Ritter College of Business and Bradley School of Business. It outlines the applicant's current salary and career details, tuition fees, expected salaries, and other financial factors to consider for each program. By calculating the present value of costs incurred and future earnings from each option, it determines that the net financial benefit is higher for the two-year MBA program at Ritter College of Business.

Uploaded by

Parshant Gupta
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© Attribution Non-Commercial (BY-NC)
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Download as PDF, TXT or read online on Scribd
1K views

The MBA Decision: Current Position

The document compares the costs and benefits of pursuing an MBA degree from two schools, Ritter College of Business and Bradley School of Business. It outlines the applicant's current salary and career details, tuition fees, expected salaries, and other financial factors to consider for each program. By calculating the present value of costs incurred and future earnings from each option, it determines that the net financial benefit is higher for the two-year MBA program at Ritter College of Business.

Uploaded by

Parshant Gupta
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 3

The MBA Decision

Current Position:
Current Salary
Growth in Current Salary
Current Age
Years to work
Current Tax rate

MBA - Ritter College of Business:


Duration of MBA program
Annual Tuition fees
Books & Supplies
Expected Salary after MBA
Signing Bonus
Growth in Salary
Tax rate

$
$
$
$

MBA -Bradley School of Business:


Duration of MBA program
Annual Tuition fees
Books & Supplies
Expected Salary after MBA
Sidning Bonus
Growth in Salary
Tax rate

$
$
$
$

Discount Rate
Common Costs:
Health Insurance (Annual)
Room & Boarding

Dr. Pankaj Varshney

50,000.00 per year


3% per year
28 years
35 years
26%

2 years
60,000.00 payable at the beginning of each year
2,500.00 per year
95,000.00 per year
15,000.00
4% per year
31%

1 year
75,000.00 payable at the beginning of each year
3,500.00 per year
78,000.00 per year
10,000.00
3.5% per year
29%
6.50%

$
$

3,000.00 payable at the beginning of each year


20,000.00 per year

1 of 3

MBA Decision

Remains at the current Job:


Post Tax Salary
Present Value of Growing Annuity

$ 37,000.00 <-- =B3*(1-B7)


$ 728,896.23 <-- =(B36/(B27-B4)*(1-(1+B4)^B6/(1+B27)^B6))
MBA - Ritter College of Business

Direct Cost of pursuing MBA


Tuition Fees
Books & Supplies
Health Insurance (Annual)
Room & Boarding
Total Cost per year
PVIF
Present Value of Direct Cost

Yr 0
165,781.69
60,000.00
2,500.00
3,000.00
20,000.00
85,500.00
1.0000
165,781.69

Indirect Cost of pursuing MBA


Annual Salary forgone while pursuing MBA
PVIF
Present Value of Indirect Cost

68,341.82

Benefits of pursuing MBA


Sign-up Bonus (After Tax)
PVIF
Present Value of Sign-up Bonus (after taxes)

$ 1,188,578.10

Yr 2

Yr 3
<-<-<-<-<-<-<--

60,000.00
2,500.00
3,000.00
20,000.00
85,500.00
0.9390

=B11
=B12
=B29
=B30
=SUM(B44:B47)
=1/(1+$B$27)^B42
=SUMPRODUCT(B48:D48,B49:D49)

38110.00
0.8817

<-- =C53*(1+B4)
<-- =1/(1+$B$27)^D42
<-- =SUMPRODUCT(B53:D53,B54:D54)

10,350.00
0.8817

<-- =B14*(1-B16)
<-- =1/(1+$B$27)^D42
<-- =SUMPRODUCT(B58:D58,B59:D59)

37000.00
0.9390
68,341.82

9,125.17

65,550.00 <-- =B13*(1-B16)

Increased Salary
Sum of Growing Annuity in Year 2
PVIF
Present Value of Increased Salary
Total Benefits

$ 1,179,452.93
$ 1,188,578.10

Net Benefit of Pursuing MBA (Ritter )

Dr. Pankaj Varshney

Yr 1

1,424,719.72
0.8278

<-- =(E62/(B27-B15)*(1-(1+B15)^(B6-B10)/(1+B27)^(B6-B10)))

<-- =1/(1+$B$27)^E42
<-- =SUMPRODUCT(B63:D63,B64:D64)
<-- =B65+B60

954,454.59

2 of 3

MBA Decision

MBA - Bradley School of Business


Direct Cost of pursuing MBA
Tuition Fees
Books & Supplies
Health Insurance (Annual)
Room & Boarding
Total Cost per year
PVIF
Present Value of Direct Cost

Yr 0
101,500.00
75,000.00
3,500.00
3,000.00
20,000.00
101,500.00
1.0000
101,500.00

Indirect Cost of pursuing MBA


Annual Salary forgone while pursuing MBA
PVIF
Present Value of Indirect Cost

34,741.78

Benefits of pursuing MBA


Sign-up Bonus (After Tax)
PVIF
Present Value of Sign-up Bonus (after taxes)

$ 1,018,157.22

Yr 2

37,000.00
0.9390

<-- =B36
<-- =1/(1+$B$27)^C73
<-- =SUMPRODUCT(B84:D84,B85:D85)

7,100.00
0.9390

<-- =B23*(1-B25)
<-- =1/(1+$B$27)^C73
<-- =SUMPRODUCT(B89:C89,B90:C90)

6,666.67

$ 1,011,490.56
$ 1,018,157.22

Net Benefit of Pursuing MBA (Bradley)

Yr 3

<-- =SUMPRODUCT(B79:D79,B80:D80)

34,741.78

Increased Salary
Sum of Growing Annuity in Year 1
PVIF
Present Value of Increased Salary
Total Benefits

Dr. Pankaj Varshney

Yr 1

55,380.00
1,147,257.88
0.8817

<-- =B22*(1-B25)
<-- =(D93/(B27-B24)*(1-(1+B24)^(B6-B19)/(1+B27)^(B6-B19)))

<-- =1/(1+$B$27)^D73
<-- =SUMPRODUCT(B94:C94,B95:C95)
<-- =B96+B91

881,915.44

3 of 3

MBA Decision

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