Gavin Carter: What is an MBA Worth?

Abstract

At 26 years old, Gavin Carter was facing a dilemma. He had just received the good news that he had been accepted to the MBA program at a prestigious University. But he had also been informed recently that he was going to be promoted within the equity research department at his current employer, a prominent investment bank. Although he was genuinely excited at the prospect of advancing his long-term prospects by going to business school, Carter needed to find out if his investment in an MBA education would pay off.

Excerpt

UVA-F-1478

Gavin Carter: What is an MBA Worth?

Gavin Carter was ignoring the beeps from his BlackBerry® handheld as he stared out the window of his apartment at the New York City skyline and contemplated his current situation. He had just received the good news that he had been accepted to the MBA program at a prestigious university just outside Washington, D.C. The dilemma was that he had also recently been informed that he was going to be promoted within the equity research department at his current employer. While he was genuinely excited at the prospect of advancing his long-term prospects by going to business school, Carter had begun to question whether the payoff was truly worth it.

A recent study of college graduates that Carter had read on the subway a few weeks before had made the case that the rate of increase in the value of education had slowed considerably since the early 1990s, even as college tuition had been steadily rising. What Carter needed to find out was whether this trend was true for MBA programs as well, and how that would impact his personal situation.

Carter thought that going to business school was equivalent to making an investment in himself. Like any investment, investing in his own education would involve paying tuition and fees (capital expenditure) now in order to increase his earnings in the future. Would an investment in an MBA pay off? What were the opportunity costs of that particular investment? With those questions in mind, Carter sat down and began to assess what the net present value (NPV) of his investment in an MBA might be.

Gavin Carter

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Keywords: Investment Education MBA Valuation Return