There are several benefits associated with higher education. In the competitive global era, it increases the chance of employability of an individual i.e. an individual having the advanced university degree will have higher chance of being employed. Pursuing a higher education, the student gets the opportunity to explore new horizons, which go undiscovered with an ordinary graduation degree. The degree also acts as an addition to the value of individual’s profile. The MBA (Master of Business Administration) from a recognized institution helps to qualify for better placement assistance. Additionally, it will elevate the individual’s level on the ladder of management hierarchy.
Higher education gives the opportunity to have in-depth knowledge of various subject matters and to decide the area in which the candidate wants to specialize. A quality institution links the student to a global environment comprising of the multi-cultural environment and practical learning (Friedlob & Plewa, 1996). It uplifts the confidence level in a candidate to handle various issues and improve decision-making skills. It will also make the individual capable of making proactive decisions.
The investment made in education is a long-term investment, which provides greater returns in the future (Brigham, Houston, Clark, & Brigham, 1996). The money spent in the education is not the expense but it is an investment that will generate greater returns in future. Although choosing an appropriate institution is a challenge, it is best to choose the best institution with affordable fee structure. It also helps to break through the traditional domestic job market by opening doors to international opportunities, which have higher earning potential.
The fees charged by the chosen college per year are as follows:
The total fee to be paid for two-year MBA is $197,200 ($98600*2). The current annual salary from the job is $55,000 which will increase by 4% every year.
The table below suggests annual salary for two years:
The total earning of two years is the opportunity cost of studying two years MBA. The opportunity cost is $116,688.
After the completion of the course, the targeted occupation will be to become an investment banker. It is a profession with a higher salary and with a wide range of career. The MBA degree is correspondence to wide prospect in the industry at both national and international level. The annual compensation marks approximately from $80,000 to $150000 for an entry level MBA. The signing bonus is usually $46,000 in the industry while the guaranteed average bonus is $38,000.
With the statistical data, it suggests the average salary for an MBA degree holder will be $110,000. The amount at the time of joining the job will be $46,000 while at the end of the year will be $148,000. The minimum growth rate during the first four years is 7% while for the remaining years is 10%. The institutions also facilitate students with an educational loan with the condition to repay after the confirmation of their placement. The educational loan interest is for 6.5% for 5 years. This will create an annual payment of $47,453.13 for a five-year period. The net present value will be determined by 6.5% discount rate.
The table suggests the cash flow column is blank for year 2 due to the payment of tuition fee at the beginning of the year while there is no cash flow at the end of year 2. The total time period to recover the entire cost along with the opportunity cost is less than three years. The payback period to cover the entire cost is 2.89 years. The tenure of the loan is five years so the net present value will help to determine the benefits of studying MBA. The benefit of MBA is clear due to the positive amount of the NPV, which suggests benefits deriving from the venture. The positive NPV indicates that the investment in the MBA education will generate the positive return ultimately as it will have present value of future benefits more than the cost. The IRR for this investment is around 17% i.e. higher than the discount rate ( Grant-writing business: Everything you need to start a successful business! 2012). Therefore, the conclusion is obtaining an MBA degree will open doors for better opportunities along with the high scope for earning.
Brigham, E. F., Houston, J. F., Clark, D. A., & Brigham, E. F. (1996). Study guide: Fundamentals of financial management. Fort Worth: Dryden Press.
Friedlob, G. T., & Plewa, F. J. (1996). Understanding return on investment. New York: Wiley.
Grant-writing business: Everything you need to start a successful business! (2012). Irvine, Calif.: Entrepreneur Press.