W5491: Math for Finance X410.

21
NPV Calculator for MBA Programs
Ashwin Shah
Mehnaz Alam
Nabil Quadri
COLOR KEY

Select a B-School or "Custom"

User Input Value

11

Select a Loan Program or "Custom"

Derived Input Value

Alternative Input for Sensitivity Analysis

Select Candidate Profile or "Custom"

Sensitivity Analysis Output

Intermediate Output Value

Output Value

Inputs
General Parameters
Length of MBA program (in years)
Horizon (in years post-MBA)
Constant Discount Rate

2
30
5.00%
-$0.25

Full-time or Part-time MBA

1.00%
-$0.53

2.00%
-$0.44

3.00%
-$0.36

Sensitivity Analysis of Discount Rate

4.00%
5.00%
6.00%
-$0.30
-$0.25
-$0.21

200.00%

Non-MBA path
Pre-MBA Annual Income (as of year of commencement of MBA, excl. of taxes)
Non-MBA Income Growth Function

$65,000.00
1

Constant Annual Growth Rate of Non-MBA Income

Time (years from commencement of MBA)->>>>>>>>>>>>>>>>
Length of Period
Variable Growth Rate of Non-MBA Income for Period
Effective Growth Rate of Non-MBA Income for Period
MBA Expenses
Total Tuition & Living Expenses
Total Approved Loan Amount
Upfront Payment of Tuition
(from Savings & Interest-free borrowings only)
Interest Rate/Year
Rate Convention

2.00%
1

7
1

5.00%
2.00%

5.00%
2.00%

5.00%
2.00%

5.00%
2.00%

5.00%
2.00%

10.00%
2.00%

10.00%
2.00%

2.00%

2.00%
2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

5
$64,945.93
$46,155.86

6
$66,244.85
$44,837.12

7
$67,569.75
$43,556.06

5
$71,765.25
$56,229.95

6
$73,200.56
$54,623.38

7
$74,664.57
$53,062.71

$40,725.00
$110,000.00
-$69,275.00
8.00%
200.00%

Grace Period (in no. of years after graduation)

Loan Maturity (in years)
Number of Payments / Year
Loan Type

0.5
30
12
3

Total payment periods

Period Interest Rate
Beginning Principal Balance

360
0.67%
$134,265.16

MBA path
Estimated Post-MBA Annual Income (excl. taxes)
Post-MBA Income Growth Function

$60,000.00
$1.00

Constant Annual Growth Rate of Post-MBA Income

Time (years after graduation)->>>>>>>>>>>>>>>>
Variable Annual Growth Rate of Post-MBA Income
Effective Annual Growth Rate of Post-MBA Income

2.00%

Outputs
Present Value of Loan Repayments
Amortized Loan Payment Amount (per period)
$985.19
Effective discount rate for each loan period
0.41%
Total present value of Loan Payments at the start of Loan Payment Period
$185,865.58
Present Value of all Loan Payments
$164,522.66
(i.e. adjusted for grace period & duration of MBA)
Present Value of Post-MBA Income
Time (years after graduation)->>>>>>>>>>>>>>>>
1
2
3
4
Annual Income
$60,000.00
$61,200.00 $62,424.00 $63,672.48
Present Value of Each Year of Post-MBA Income up to Horizon
$51,830.26
$50,349.39 $48,910.84 $47,513.38
Present Value of all Post-MBA Income up to Horizon
$1,053,771.93
Present Value of Projected Non-MBA Income
Time (years from commencement of MBA)->>>>>>>>>>>>>>>>
1
2
3
4
Annual Income
$66,300.00
$67,626.00 $68,978.52 $70,358.09
Present Value of Each Year of Non-MBA Income (projected) up to Horizon
$63,142.86
$61,338.78 $59,586.24 $57,883.78
Present Value of all Projected Non-MBA Income (projected) up to Horizon
$1,335,942.11
Present Value of Pre-MBA Income forfeited for Duration of MBA (to be added back to NPV for part-time MBA)
Time (years from commencement of MBA program)->>>>>>>>>>>>>>>>
1
2
Annual Income
$66,300.00
$67,626.00
Present Value of Each Year of Forfeited Pre-MBA Income for duration of MBA
$63,142.86
$61,338.78
Present Value of all Forfeited Non-MBA Income for duration of MBA
$124,481.63
NPV of MBA

Net Present Value of MBA

-$252,936.20

count Rate
7.00%
-$0.18

8.00%
-$0.15

2.00%

2.00%

2.00%

2.00%

8
$68,921.14
$42,311.60

9
$70,299.56
$41,102.70

8
$76,157.86
$51,546.64

9
$77,681.02
$50,073.88

Constant

EAR

Full-time

Subsidized (Govt.)

Variable

APR

Part-time

Unsubsidized (Govt.)

Private

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25
1

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
$71,705.55 $73,139.67 $74,602.46 $76,094.51 $77,616.40 $79,168.73 $80,752.10 $82,367.14 $84,014.49 $85,694.77 $87,408.67 $89,156.84 $90,939.98 $92,758.78 $94,613.96 $96,506.23
$39,928.34 $38,787.53 $37,679.31 $36,602.76 $35,556.97 $34,541.05 $33,554.17 $32,595.48 $31,664.18 $30,759.49 $29,880.64 $29,026.91 $28,197.57 $27,391.92 $26,609.30 $25,849.03

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
$79,234.64 $80,819.33 $82,435.72 $84,084.43 $85,766.12 $87,481.44 $89,231.07 $91,015.69 $92,836.01 $94,692.73 $96,586.58 $98,518.31
###
###
###
###
$48,643.19 $47,253.39 $45,903.29 $44,591.77 $43,317.72 $42,080.07 $40,877.78 $39,709.85 $38,575.28 $37,473.13 $36,402.47 $35,362.40 $34,352.04 $33,370.55 $32,417.11 $31,490.91

26

27

28

29

30

31

32
1

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

2.00%

26

27

28

29

30

2.00%

2.00%

2.00%

2.00%

2.00%

26
27
28
29
30
$98,436.36
###
###
###
###
$25,110.49 $24,393.05 $23,696.10 $23,019.07 $22,361.38

26
27
28
29
30
31
32
###
###
###
###
###
###
###
$30,591.17 $29,717.13 $28,868.07 $28,043.27 $27,242.03 $26,463.69 $25,707.59

School/Program Name

2010 Rank
[2]

Duration of
Program (in
years)

FullTotal Tuition
time /
(in USD)
Part-time

Custom
Harvard Business School
Kellogg School of Management
Columbia
Kelley School of Business
Yale
GeorgeTown McDonough
Babson Olin
Rocheter Simon School of Business
Arizona State Carey
Univ of Phoenix

2
4
9
19
21
33
39
43
49
NA

2
2
2
2
2
2
2
2
2
2

FULL-TIME
FULL-TIME
FULL-TIME
FULL-TIME
FULL-TIME
FULL-TIME
FULL-TIME
FULL-TIME
FULL-TIME
PART-TIME

$102,400.00
$108,000.00
$111,736.00
$90,328.00
$105,500.00
$99,276.00
$88,450.00
$91,866.00
$75,000.00
$38,610.00

Room and Total Health

Board/Utiliti
Services
es Expenses
Fees (in
(in USD)
USD)

Total Other
Fees
(in USD)

Total Misc.
Total Tuition &
Expenses (in Living Expenses
USD)
(in USD)

Average Annual
Income postMBA
(in USD, excl.
taxes)

$0.00
$23,390.00
$30,582.00
$41,400.00
$26,792.00
$28,530.00
$25,012.00
$23,004.00
$14,000.00
$22,872.00
$0.00

$3,020.00
$5,168.00
$5,670.00
$0.00
$3,860.00
$3,440.00
$2,023.00
$4,540.00
$3,604.00
$0.00

$6,390.00
$0.00
$5,764.00
$1,200.00
$2,300.00
$1,201.00
$0.00
$1,000.00
$1,024.00
$2,070.00

$0.00
$3,294.00
$0.00
$8,776.00
$0.00
$0.00
1200
$0.00
$1,290.00
$45.00

$135,200.00
$147,044.00
$164,570.00
$127,096.00
$140,190.00
$128,929.00
$114,677.00
$111,406.00
$103,790.00
$40,725.00

$110,000.00
$105,000.00
$100,000.00
$90,000.00
$100,000.00
$95,000.00
$83,500.00
$72,000.00
$85,000.00
$60,000.00

Constant PostMBA Income

Growth Rate for
20 yr. Horizon [1]

3.308%
2.770%
2.878%
1.783%
2.169%
2.768%
2.344%
2.160%
2.500%
2.000%

Source

[1] Estimating the Internal Rate of Return on an MBA: A Comparison of the Return from Top-Ranked & SecondTier Programs, John B. White., Morgan P. Miles, and Roger M. White
[2] Bloomberg Business Week: The Best U.S. B-Schools of 2010
http://www.businessweek.com/interactive_reports/bs_2010_US_FTMBA_TAB_1111.html
http://www.hbs.edu/mba/admissions/costsummary.html
http://www.kellogg.northwestern.edu/programs/fulltimemba/tuition_financial_aid_scholarships.aspx
http://www4.gsb.columbia.edu/mba/admissions/tuition/budget
http://kelley.iu.edu/mba/admissions/tuition.cfm
http://mba.yale.edu/MBA/admissions/financial_aid/student_budget.shtml
http://msb.georgetown.edu/mba/admissions/cost/
http://www3.babson.edu/offices/sfs/graduate/tuition_payments.cfm
http://www.simon.rochester.edu/programs/full-time-mba/tuition--financial-aid/tuition--expenses/index.aspx
http://wpcarey.asu.edu/mba/full-time/tuition/program-cost.cfm
http://www.phoenix.edu/tuition_and_financial_options/tuition_and_fees.html

Loan Program with Options

Custom
Federal subsidized graduate
Federal unsubsidized graduate
Citibank

Interest Rate
(p.a.)

Rate
Grace Period
Conventi
(in no. of
on
years after
(EAR/APR
graduation)
)

6.80% APR
6.80% APR
8.00% APR

0.5
0.5
0.5

Loan
Maturity (in
years)
20.0
20.0
30.0

Number of
Payments /
Year

Type of Loan
(SG = Subsidized Govt.
UG = Unsubsidized
Govt.
P = Private)

12 SG
12 UG
12 P

Approved
loan limit
(per year)
$20,500
$20,500
$75,000

Source

http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp
http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp
http://www.finaid.org/loans/privatestudentloans.phtml

Candidate

Custom
Mr. Non-Profit
Ms. Wall Street
Mr. IT

Pre-MBA Annual
Income
Total Approved
(as of year of
Loan Amount
commencement
(in USD)
of MBA, in USD,
excl. of taxes)
$38,000.00
$85,000.00
$65,000.00

$90,000.00
$120,000.00
$110,000.00

Starting Row
Ending Row

Candidate
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Mr. Non-Profit
Ms. Wall Street
Ms. Wall Street
Ms. Wall Street
Ms. Wall Street
Ms. Wall Street
Ms. Wall Street
Ms. Wall Street
Ms. Wall Street
Ms. Wall Street
Ms. Wall Street
Ms. Wall Street
Ms. Wall Street
Ms. Wall Street
Ms. Wall Street
Ms. Wall Street
Ms. Wall Street
Ms. Wall Street
Ms. Wall Street

5
94

Candida
te Ref

School

School
Ref

2 Harvard Business School

2 Kellogg School of Management
2 Columbia
2 Kelley School of Business
2 Yale
2 GeorgeTown McDonough
2 Babson Olin
2 Rocheter Simon School of Business
2 Arizona State Carey
2 Univ of Phoenix
2 Harvard Business School
2 Kellogg School of Management
2 Columbia
2 Kelley School of Business
2 Yale
2 GeorgeTown McDonough
2 Babson Olin
2 Rocheter Simon School of Business
2 Arizona State Carey
2 Univ of Phoenix
2 Harvard Business School
2 Kellogg School of Management
2 Columbia
2 Kelley School of Business
2 Yale
2 GeorgeTown McDonough
2 Babson Olin
2 Rocheter Simon School of Business
2 Arizona State Carey
2 Univ of Phoenix
3 Harvard Business School
3 Kellogg School of Management
3 Columbia
3 Kelley School of Business
3 Yale
3 GeorgeTown McDonough
3 Babson Olin
3 Rocheter Simon School of Business
3 Arizona State Carey
3 Univ of Phoenix
3 Harvard Business School
3 Kellogg School of Management
3 Columbia
3 Kelley School of Business
3 Yale
3 GeorgeTown McDonough
3 Babson Olin
3 Rocheter Simon School of Business

Loan Program

2 Federal subsidized graduate

3 Federal subsidized graduate
4 Federal subsidized graduate
5 Federal subsidized graduate
6 Federal subsidized graduate
7 Federal subsidized graduate
8 Federal subsidized graduate
9 Federal subsidized graduate
10 Federal subsidized graduate
11 Federal subsidized graduate
2 Federal unsubsidized graduate
3 Federal unsubsidized graduate
4 Federal unsubsidized graduate
5 Federal unsubsidized graduate
6 Federal unsubsidized graduate
7 Federal unsubsidized graduate
8 Federal unsubsidized graduate
9 Federal unsubsidized graduate
10 Federal unsubsidized graduate
11 Federal unsubsidized graduate
2 Citibank
3 Citibank
4 Citibank
5 Citibank
6 Citibank
7 Citibank
8 Citibank
9 Citibank
10 Citibank
11 Citibank
2 Federal subsidized graduate
3 Federal subsidized graduate
4 Federal subsidized graduate
5 Federal subsidized graduate
6 Federal subsidized graduate
7 Federal subsidized graduate
8 Federal subsidized graduate
9 Federal subsidized graduate
10 Federal subsidized graduate
11 Federal subsidized graduate
2 Federal unsubsidized graduate
3 Federal unsubsidized graduate
4 Federal unsubsidized graduate
5 Federal unsubsidized graduate
6 Federal unsubsidized graduate
7 Federal unsubsidized graduate
8 Federal unsubsidized graduate
9 Federal unsubsidized graduate

Ms. Wall
Ms. Wall
Ms. Wall
Ms. Wall
Ms. Wall
Ms. Wall
Ms. Wall
Ms. Wall
Ms. Wall
Ms. Wall
Ms. Wall
Ms. Wall
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT
Mr. IT

Street
Street
Street
Street
Street
Street
Street
Street
Street
Street
Street
Street

3 Arizona State Carey

3 Univ of Phoenix
3 Harvard Business School
3 Kellogg School of Management
3 Columbia
3 Kelley School of Business
3 Yale
3 GeorgeTown McDonough
3 Babson Olin
3 Rocheter Simon School of Business
3 Arizona State Carey
3 Univ of Phoenix
4 Harvard Business School
4 Kellogg School of Management
4 Columbia
4 Kelley School of Business
4 Yale
4 GeorgeTown McDonough
4 Babson Olin
4 Rocheter Simon School of Business
4 Arizona State Carey
4 Univ of Phoenix
4 Harvard Business School
4 Kellogg School of Management
4 Columbia
4 Kelley School of Business
4 Yale
4 GeorgeTown McDonough
4 Babson Olin
4 Rocheter Simon School of Business
4 Arizona State Carey
4 Univ of Phoenix
4 Harvard Business School
4 Kellogg School of Management
4 Columbia
4 Kelley School of Business
4 Yale
4 GeorgeTown McDonough
4 Babson Olin
4 Rocheter Simon School of Business
4 Arizona State Carey
4 Univ of Phoenix

10 Federal unsubsidized graduate

11 Federal unsubsidized graduate
2 Citibank
3 Citibank
4 Citibank
5 Citibank
6 Citibank
7 Citibank
8 Citibank
9 Citibank
10 Citibank
11 Citibank
2 Federal subsidized graduate
3 Federal subsidized graduate
4 Federal subsidized graduate
5 Federal subsidized graduate
6 Federal subsidized graduate
7 Federal subsidized graduate
8 Federal subsidized graduate
9 Federal subsidized graduate
10 Federal subsidized graduate
11 Federal subsidized graduate
2 Federal unsubsidized graduate
3 Federal unsubsidized graduate
4 Federal unsubsidized graduate
5 Federal unsubsidized graduate
6 Federal unsubsidized graduate
7 Federal unsubsidized graduate
8 Federal unsubsidized graduate
9 Federal unsubsidized graduate
10 Federal unsubsidized graduate
11 Federal unsubsidized graduate
2 Citibank
3 Citibank
4 Citibank
5 Citibank
6 Citibank
7 Citibank
8 Citibank
9 Citibank
10 Citibank
11 Citibank

Loan
Program
Ref
2
2
2
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3
3
3
4
4
4
4
4
4
4
4
4
4
2
2
2
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3

Loan
Interest
Rate
(p.a.)
6.80%
6.80%
6.80%
6.80%
6.80%
6.80%
6.80%
6.80%
6.80%
6.80%
6.80%
6.80%
6.80%
6.80%
6.80%
6.80%
6.80%
6.80%
6.80%
6.80%
8.00%
8.00%
8.00%
8.00%
8.00%
8.00%
8.00%
8.00%
8.00%
8.00%
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07

Loan
Maturity
(in years)
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
30
30
30
30
30
30
30
30
30
30
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20

NPV
$1,355,502.88
$1,096,763.30
$1,009,104.64
$628,743.87
$868,547.35
$921,291.30
$630,720.67
$393,941.97
$699,381.65
$301,801.02
$1,338,321.03
$1,079,581.45
$991,922.79
$611,562.02
$851,365.50
$904,109.45
$613,538.82
$376,760.12
$682,199.80
$284,619.17
$1,313,900.91
$1,055,161.33
$967,502.66
$587,141.90
$826,945.38
$879,689.33
$589,118.70
$352,340.00
$657,779.68
$260,199.05
388511.48
129771.9
42113.23
-338247.53
-98444.05
-45700.1
-336270.73
-573049.43
-267609.75
-575180.58
365602.34
106862.77
19204.1
-361156.67
-121353.18
-68609.24
-359179.86
-595958.56

3
3
4
4
4
4
4
4
4
4
4
4
2
2
2
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3
3
3
4
4
4
4
4
4
4
4
4
4

0.07
0.07
0.08
0.08
0.08
0.08
0.08
0.08
0.08
0.08
0.08
0.08
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.07
0.08
0.08
0.08
0.08
0.08
0.08
0.08
0.08
0.08
0.08

20
20
30
30
30
30
30
30
30
30
30
30
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
30
30
30
30
30
30
30
30
30
30

-290518.88
-598089.71
333042.18
74302.61
-13356.06
-393716.83
-153913.34
-101169.4
-391740.03
-628518.72
-323079.04
-630649.88
799904.75
541165.18
453506.51
73145.74
312949.23
365693.17
75122.54
-161656.15
143783.52
-202089.35
778904.71
520165.14
432506.47
52145.7
291949.19
344693.13
54122.5
-182656.19
122783.49
-223089.39
749057.9
490318.32
402659.66
22298.89
262102.37
314846.32
24275.69
-212503.01
92936.67
-252936.2