Why an MBA Now?

The Simon MBA: Now vs. Later

In a 2006 white paper, Dean Mark Zupan and Professor James Brickley compare the net present value of an MBA for someone coming directly from college with someone working four years prior to enrolling. They find the net present value of an MBA tends to be higher when the degree is earned earlier. The accompanying table shows why pursuing the MBA now yields an appreciably higher value later since individuals secure the post-MBA salary jump sooner and then see it compounded by subsequent annual wage increases. At the same time, these individuals sacrifice less in salary to attend business school than someone who has worked for several years prior to enrolling.

	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7	NPV
Now	-40,000	-40,000	72,000	75,600	79,380	83,349	87,516	$282,124
Later	40,000	42,000	44,100	46,305	-40,000	-40,000	87,000	$167,911

Assumptions:

1. Cash flows are inflation adjusted and expressed in 2009 dollars.
2. $40,000 starting salary for a Bachelor’s graduate.
3. Annual real wage growth of 5 percent/year for B.A. and MBA graduates.
4. Starting MBA salary of $72,000 with no prior work experience.
5. Starting MBA salary of $87,000 with four years prior work experience.
6. MBA tuition of $40,000/year.
7. A real discount rate of 2 percent/year.