37 years of pay
The year you decide, then school, then work through retirement.
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What an MBA returns is a lab by Gagan Malik. It walks a career capital budget: pay before, during, and after the program, tax and the chance of a year with no pay, then tuition and travel. It reports payback, discounted payback, net present value, and the internal rate of return.
Business
What an MBA returns
By Gagan Malik
2 min read
An MBA is a trade
You give up a year or two of pay and write a cheque for the fees now. In return, you hope to earn more for the rest of your career.
The catch is timing. A dollar today is worth more than a dollar tomorrow, because today's dollar can already be earning something. So every extra dollar the degree pays you later counts for a little less, and the further away it lands, the less it counts. Kathleen Fitzgerald taught me this with the same model at Chicago Booth. kathleen-fitzgerald chicagobooth
The test
The question is not whether you will earn more. It is whether the extra pay, after tax and shrunk back to today's money, adds up to more than you spent to get it.
The rate that does the shrinking is your hurdle rate: what the same money would have earned if you had invested it instead. If the degree beats that rate, it pays. If it does not, the brochure salary was flattering the deal.
What the answer leaves out
An MBA is not only cash. It buys a network, a second career you would not have tried, and the nerve to walk into rooms you used to avoid. All of that is real, and none of it fits in a cell.
So read the answer as a floor. If the cash clears your hurdle rate on its own, everything else is a bonus. If it does not, you are paying for the rest, and you should know the price before you sign.
The model
Answer each question in the sentence. The chart shows what that answer does.
MBA return on Desktop
I am. I plan to retire at. The program lasts years, and I will from the job. Amounts are in.
Payback 5 years. Discounted payback 6 years. Value today $1,862,971. Return 34.5%.
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