Calculating the Value of an MBA

How do you know if getting an MBA is really your time and money invested?

Bloomberg Businessweek has recently developed a new tool to help potential business school students answer that exact question. Using a standard measure of financial success, calculated with data reported to Bloomberg by MBA graduates, this tool is doing the very important number crunching that business students rely on to make sound decisions. It calculates profit relative to initial principal, or return on investment. Anyone can contribute, by answering questions used in the tool to get a net 10-year ROI (in dollars) and an annualized ROI percentage. For each question, you can either accept the default or median (based on Bloomberg surveys) or change it with the slider. 

Bloomberg has even done a comparison of a select list of business schools already, to give users an idea of how the tool works. University of Kentucky - Gatton College of Business and Economics, for example, has an ROI of 23.8%, whereas the University of Florida's Warrington Business School, in Gainesville, has an ROI of 17.6%. 

You can enter your own figures or accept median estimates for any one of the 77 US schools or the median estimates for all schools combined. In return, you’ll get a net 10-year ROI in dollars and a compounded average annualized ROI percentage. You can also use the tool to compare top-ranked schools with smaller, more affordable ones.

Bloomberg uses one example, that assumes an investment of $286,182 to get your MBA (including cost of tuition, and income foregone). You’d have to make an average return of 12.7% for a decade, in order for that investment to pay off. 

To reach that conclusion, Bloomberg made several assumptions about the decade after graduation: Future inflation would reduce the effective interest rate on student loans, the real value of any signing bonus invested in the markets and the impact of annual raises, and raises would be bigger with an MBA than without one. For more details, hover over the information icons below and read our methodology.

So, the only question that remains, is it it worthwhile for you to get your MBA?