Getting an MBA is an investment in yourself, and it should beviewed through the same lens as any other investment decision. Solet's see if MBA is a good decision with a simplified example? Wehave to look at the two following options.

1. You go to business school, forego two years of salary, borrowaround $50,000 per year (both tuition and cost of living) and thengo on to make more money (this is the whole point) than you wouldon your current career trajectory.
2. You do not go to business school and continue to make yourcurrent salary and get raises and promotions at a normal rate.These are not easy assumptions to make but linear growth usuallyworks best.
3. Your current salary is 50,000 and grows at 3% every year.
4. Your salary after MBA will be 90,000 and will grow by the samepercentage, i.e. 3%.
5. Your cost of capital, i.e. interest rate at which you canfinance your MBA is 7%
6. Assume you're doing your MBA at the age of 40, and have 20years of working life after MBA (or 22 including MBA)
7. For simplicity, assume your first cash flow, i.e. the firsttuition payment is next year, i.e. you don't have any explicit cashflows (tuition or salary) in the present (Year 0).

Calculate the NPV of MBA using the information above. Ignoreopportunity costs, just use explicitly stated costs (tuition) andbenefits (salary). Use Excel, and upload the Excel file using thedialog box at the bottom of the exam.

Select one:

a. $327,623.38

b. $957,594.29

c. $204,594.64

d. $1,227,888.92