MBA Return On Investment

MBA ROI Based on Net Present ValueMBA Aspirants should calculate the return on investment before choosing one program over the other. We advise against shortlisting schools purely based on ROI, but when it comes to choosing your dream school, and say if you are stuck with two equally good ones - MIT and Stanford, LBS and INSEAD, a term commonly used by Finance professionals comes into consideration – Net Present Value.

What is Net Present Value?

Net present value is the net value of cash inflows and outflows for a period, based on the current value. The definition by itself can be a little confusing, but when you calculate Return on investment for an MBA program where your expense is calculated over 1-2 years, the investment and returns have to be calculated at current value.

Let us compare MIT vs. Stanford and find out which program offers a better return on investment. The data is based on the latest comparison between MIT Sloan and Stanford MBA program. You can download the data and analysis from our new book - How to choose the Best MBA in US: The Ultimate Guide
We have added the total cost for Stanford and MIT. We would use the same numbers for the 2nd year for easier calculation.

MBA Research Utility ValueBenjamin Franklin showed us the power of Moral Algebra method. We adapted the method for MBA Research and demonstrated how you could choose when it comes to two equally good MBA programs. The method works when the choices are limited, but while interacting with MBA Applicants through our MBA Admissions Consulting service, we asked the applicants to cite the reasons for shortlisting the MBA programs. Some were rational reasons, reached after extensive research while many were irrational conclusions reached through faulty assumptions. When the reasons for selecting the MBA program are flawed, Admission consultants cannot successfully strategize and guide the MBA applicant through the Admission process. Deep down, applicants know that they have selected the MBA programs based on reputation (one of the several factors that should influence your selection) and not on extensive attribute matching – a process we highly recommend.

We falsely...

The 2012 Alumni Perspectives GMAC report gives us insight into the real return on investment on MBA programs – Salary, Job Satisfaction and Current Employment.

Salary and Compensation:  According to the survey, the median Salary reported by Full-time MBA Alumni from 2000-11 was US$95,000, with additional compensation of $18,123. As expected, Executive MBAs earned the highest median salary, $ US$125,000 and the highest compensation of $ US$153,445. Part-time MBAs earned the lowest median Salary at US$91,000, with additional compensation of US$106,000.

Return on Investment: Ten years after graduation, MBA Alumni nearly doubled their return on investment. Within the first year of graduation, nearly 1/3rd of the investment on graduate degree were earned and the entire investment were earned in four years

Job Satisfaction: The real return on investment on your MBA degree is Job Satisfaction. It directly relates whether you have achieved your post-MBA goals. Interestingly, 36% of the survey participants said that passion (doing work that one enjoys) is the prime driver for Job Satisfaction followed by compensation (18%) and 15% recognition...

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