Simple MBA NPV and IRR Calculator

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Permalink Reply by Abdullah Mahmood Bakeer on July 19, 2010 at 7:14am

Many thanks George, it is a useful tool.

Best regards,

Abdullah

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Permalink Reply by Kunal on July 19, 2010 at 10:26am

I think some of the estimates - especially related to living expenses etc. and also tution are exaggeration.

This is a scenario where the NPV turns out to be 'zero' - but this is not the most accurate case.

Also - it is important to assess the intangible value of increased 'confidence' etc. to it too.

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Permalink Reply by Bonita Austin on July 21, 2010 at 8:36am

Along the lines of assumptions...Who is getting annual raises of 6% in this economic environment? Most people are happy to be employed and not taking voluntary pay cuts to avoid layoffs. I think a more reasonable assumption would be 0% pay raises in 2010, 2011 and then assume increases in line with inflation. Unless you have a family to support while in school (mortgage payments etc...), $50,000 per year in living expenses is very high. Note if that is a reasonable estimate, then your current salary of $50,000 will not support your lifestyle.

Also, not all MBA degrees are the same. Some graduates are earning higher starting salaries than others depending on which school they attend.

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Permalink Reply by Rustam Ku Azmi on July 21, 2010 at 8:44am

Thanks for building the model George...I have never actually thought about calculating the IRR returns on MBA or in fact any level of education. Its food for thought.. of course different individuals shall put in numbers that they think are representative of their condition in relation to living expenses, tuition fees etc..

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Permalink Reply by George on July 21, 2010 at 2:58pm

Thanks guys! I'm glad some of you are finding the sheet useful.

@Kunal and Bonita: It's a model, you are free to change the parameters to whatever you feel is realistic. Also, the default parameters are just variables I inserted to check the model. Kunal, you noted the NPV was zero -- that was by design. Note, the IRR and discount rate are equal, which should correspond to an NPV of zero.

Bonita, thanks for your comments. I somewhat agree with some of your generalizations. However, as stated above, this is model -- it's meant to be subjective. One person’s baseline may well be the next persons best/worst case. Consider the individual that plans to attend Columbia or NYU and live in Manhattan; 50k is not an unrealistic estimate for living expenses. Also, it's not unlikely that high performers (i.e. those that were likely not laid off) received raises or bonuses, even in the current economic environment. For example, I received a raise that was multiples of 6% in 2009 (in the midst of dozens of co-workers getting laid off). Lastly, I think it's obvious that graduates earn different amounts depending on their job, where they went to school, their experience, etc., which is precisely why this tool allows for customization.

So, a final note to everyone who comes in contact with this sheet and doesn't agree with the default assumptions, they can be modified -- please feel free to change them to whatever you believe fits your economic reality ;-) .

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Permalink Reply by Rajesh Dattaram Rajeshirke on July 22, 2010 at 5:14am

thanks very much
this would be helpful

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Permalink Reply by Jaspal Singh Kahlon on July 23, 2010 at 10:56am

Thanks for sharing. I am calculating my NPV. :)

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Permalink Reply by nkosana bob nkomo on July 25, 2010 at 12:55am

Ngiyabonga (Many Thanks in Zulu). Its a useful tool.

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Permalink Reply by Stewart Lee Goodwyn on July 27, 2010 at 5:48am

Greetings George, do you know anyone who is really good in stichastic modeling & VaR?
If yes, could you send them my way. I have problem that is stumping the best of them..
Brgds, Stewart

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