The MBA Decision

Current Position:
Current Salary $ 50,000.00 per year
Growth in Current Salary 3% per year
Current Age 28 years
Years to work 35 years
Current Tax rate 26%

MBA - Ritter College of Business:

Duration of MBA program 2 years
Annual Tuition fees $ 60,000.00 payable at the beginning of each year
Books & Supplies $ 2,500.00 per year
Expected Salary after MBA $ 95,000.00 per year
Signing Bonus $ 15,000.00
Growth in Salary 4% per year
Tax rate 31%

MBA -Bradley School of Business:

Duration of MBA program 1 year
Annual Tuition fees $ 75,000.00 payable at the beginning of each year
Books & Supplies $ 3,500.00 per year
Expected Salary after MBA $ 78,000.00 per year
Signing Bonus $ 10,000.00
Growth in Salary 3.5% per year
Tax rate 29%

Discount Rate 6.50%

Common Costs:
Health Insurance (Annual) $ 3,000.00 payable at the beginning of each year
Room & Boarding $ 20,000.00 per year

Dr. Pankaj Varshney 1 of 3 MBA Decision

Remains at the current Job:
Post Tax Salary $ 37,000.00 <-- =B3*(1-B7)
Present Value of Growing Annuity $ 728,896.23 <-- =(B36/(B27-B4)*(1-(1+B4)^B6/(1+B27)^B6))

MBA - Ritter College of Business (Wilton University)

Yr 0 Yr 1 Yr 2 Yr 3
Direct Cost of pursuing MBA: $ 165,781.69
Tuition Fees 60,000.00 60,000.00 <-- =B11
Books & Supplies 2,500.00 2,500.00 <-- =B12
Health Insurance (Annual) 3,000.00 3,000.00 <-- =B29
Room & Boarding 20,000.00 20,000.00 <-- =B30
Total Cost per year 85,500.00 85,500.00 <-- =SUM(B44:B47)
PVIF 1.0000 0.9390 <-- =1/(1+$B$27)^B42
Present Value of Direct Cost $ 165,781.69 <-- =SUMPRODUCT(B48:D48,B49:D49)

Indirect Cost of pursuing MBA: $ 68,341.82

Annual Salary forgone while pursuing MBA 37,000.00 38,110.00 <-- =C53*(1+B4)
PVIF 0.9390 0.8817 <-- =1/(1+$B$27)^D42
Present Value of Indirect Cost $ 68,341.82 <-- =SUMPRODUCT(B53:D53,B54:D54)

Benefits of pursuing MBA (2-Year) $ 1,188,578.10

Sign-up Bonus (After Tax) 10,350.00 <-- =B14*(1-B16)
PVIF 0.8817 <-- =1/(1+$B$27)^D42
Present Value of Sign-up Bonus (after taxes) $ 9,125.17 <-- =SUMPRODUCT(B58:D58,B59:D59)

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

Sum of Growing Annuity in Year 2 1,424,719.72 <-- =(E62/(B27-B15)*(1-(1+B15)^(B6-B10)/(1+B27)^(B6-B10)))
PVIF 0.8278 <-- =1/(1+$B$27)^E42
Present Value of Increased Salary $ 1,179,452.93 <-- =SUMPRODUCT(B63:E63,B64:E64)
Total Benefits $ 1,188,578.10 <-- =B65+B60

Net Benefit of Pursuing MBA (Ritter ) $ 954,454.59 $ 728,896.23

Dr. Pankaj Varshney 2 of 3 MBA Decision

 MBA - Bradley School of Business (Mount Perry)

Yr 0 Yr 1 Yr 2 Yr 3
Direct Cost of pursuing MBA $ 101,500.00
Tuition Fees 75,000.00
Books & Supplies 3,500.00
Health Insurance (Annual) 3,000.00
Room & Boarding 20,000.00
Total Cost per year 101,500.00
PVIF 1.0000
Present Value of Direct Cost $ 101,500.00 <-- =SUMPRODUCT(B79:D79,B80:D80)

Indirect Cost of pursuing MBA $ 34,741.78

Annual Salary forgone while pursuing MBA 37,000.00 <-- =B36
PVIF 0.9390 <-- =1/(1+$B$27)^C73
Present Value of Indirect Cost $ 34,741.78 <-- =SUMPRODUCT(B84:D84,B85:D85)

Benefits of pursuing MBA (1-Year) $ 1,018,157.22

Sign-up Bonus (After Tax) 7,100.00 <-- =B23*(1-B25)
PVIF 0.9390 <-- =1/(1+$B$27)^C73
Present Value of Sign-up Bonus (after taxes) $ 6,666.67 <-- =SUMPRODUCT(B89:C89,B90:C90)

Increased Salary 55,380.00 <-- =B22*(1-B25)

Sum of Growing Annuity in Year 1 1,147,257.88 <-- =(D93/(B27-B24)*(1-(1+B24)^(B6-B19)/(1+B27)^(B6-B19)))
PVIF 0.8817 <-- =1/(1+$B$27)^D73
Present Value of Increased Salary $ 1,011,490.56 <-- =SUMPRODUCT(B94:D94,B95:D95)
Total Benefits $ 1,018,157.22 <-- =B96+B91

Net Benefit of Pursuing MBA (Bradley) $ 881,915.44

Summary
If Ben remains in his current job $ 728,896.23
If Ben goes to Ritter College of Business (2yr MBA) $ 954,454.59
If Ben goes to Bradley School of Business (1yr MBA) $ 881,915.44

Dr. Pankaj Varshney 3 of 3 MBA Decision