Apr 25, 2009

Price of Darden MBA

First a disclaimer. I computed costs of MBA initially to make sure it made financial sense, but once I became convinced of the value of MBA, then computing the actual financial cost became more of an academic exercise.

Computing the cost of MBA can be complicated if you look into the crystal ball of the future, of what could be and what might be missed on account of devoting 2 years of one's life to school. However, the short-term monetary costs are fairly straight-forward. There are two broad categories of financial costs: 1) tuition, fees & living expenses and 2) opportunity cost.

1) Tuition & fees:
Darden tuition and required fees for out-of-state students are $48,500 for 2009-2010. I'm going to assume an increase to $51,500 for 2010-2011. Darden MBA website suggests a 9-mo living expense of $20,500. If I project a 4% cost increase the following year, and use 22-mo expense over the course of the MBA program, then the cost of the school itself is approximately $150,000.

2) Opportunity cost:
This depends on the individual. For me, here's the deal. Our firm FY roughly corresponds to school year. For 2009-2010, I expect a base of around $64,000 and a promotion bonus of $6,500. For 2010-2011, I can expect a base of around $68,000, and probably no material bonus. The foregone wages are off-set by 2010 summer internship expected at around $18,000 for 12-weeks. The net cost is $120,500.

Darden 2009 - 2011 $ 150,000
Opportunity cost 120,500
$ 270,500

This is no small amount. Nevertheless, using a reasonable projection of post-MBA salary increases, I personally expect to re-coup the financial cost alone within 4-5 years. Apart from this, the value of MBA appears to be so much more that are not shown in these figures. In the end, such factors are intangibles, and you can certainly assign a value to it, but only time will tell how much it's truly worth.

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