Analyze your education investment

new-pigMost MBA applicants do not evaluate the Return Of Investment (ROI) of their education properly. Many of them take for granted that they will get a six-figure job after graduation, as if the average wages published by the business school are guaranteed. They are not, and the data the statistics show can be easily manipulated.

To analyze the ROI of your education investment, you should calculate the value of the money you spend on the MBA program over time, including the risk of not finding a good job immediately and of not fulfilling your salary expectations. Additionally, you should not forget that you would not have a static career if you had not gotten an MBA. Your salary would have increased anyway, as a consequence of your career’s natural evolution. Any investment should be evaluated only in contrast with its alternative, so you should only take into account the differential income increase you expect by pursuing an MBA program.

Use the calculator below to estimate the Net Present Value (NPV) of your education investment.

Present Gross Annual Salary ($) Read this
If you are unemployed, fill in the Present Gross Annual Salary you would expect to have if you looked for a job instead of going to business school. Close X
Present Net Annual Salary ($)Read this
If you are unemployed, fill in the Present Net Annual Salary you would expect to have if you looked for a job instead of going to business school. Close X
Duration of program
Cost of program ($)Read this
Consider the cost of the program and all the differential costs that will arise if you pursue your degree. Close X
Differential Salary Increase (%) Read this
Most MBA applicants overestimate their post-graduate income increase. Most of the post-graduate income increase would have happened regardless of the MBA, as a result of evolving professional experience and marketable skills. You should consider only the average differential percentage of income increase over a 10-year period. Do not take the average post-graduate salaries published by business schools as a reference (I explain why you should not consider them in chapter 6). Contact professionals in your industry and/or in your profession and make a small survey on the differential income of MBA vs. non-MBA professionals. Make sure that this differential is caused by the MBA itself, and not by other variables, such as the admission criteria of business schools. Close X
Average tax rate (%)Read this
Almost all countries apply the same tax principle: Each cut-off of your income has an incremental tax rate, according to your country tax bracket. In the US, if you are single, everything you earn between $87,850 and $183,250 carries a 28% tax.You can learn more here. Close X
Net Present Value ($) What is this
The Net Present Value determines the present value of an investment. It is like saying that, for investing in some determined project, you would add that value to your assets today. If the NPV is negative, the investment loses value. If it is positive, it may indeed be a good investment. To know more about the formula of the NPV, click here . The calculator at uses some arbitrary variable values: Internal Rate of Return is 7%, and the investment is evaluated over a 10-year period. It considers that you will get a job by the time you finish your program (which is often not the case) and that you will have an average annual salary increase of 6% (while some statistics show that the average pay raise is between 2.5% and 3.3% and top performers get an average 4.5% pay raise).It also considers that you do not finance the program with student loans.If you want to customize these variables or your cash flows, you can use the NPV calculator available here . Close X