ST Alpha - "So I just crunched the numbers of the MBA and wow.. it seems like a really BAD deal to do it now. " (Reading a Post)

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So I just crunched the numbers of the MBA and wow.. it seems like a really BAD deal to do it now.

Posted by James Bond (aka Igor) (aka Igor) Feb 9 '11, 16:44

The actual loan would balloon to about $113k. (Start with $70k, interest rate will be around 7.2% and I don't think it will be paid off until 7 years post loan origination).
PLUS, the opportunity cost of 1 year of attending salary.
Assume attending salary of $200k discounted to today's dollars is $141k.
So getting the MBA today will cost about ~$254k.

I am assuming that if you get the MBA later (executive MBA), you can work while getting the MBA. So you won't loss out on the attending's salary (or at least not as much).

What do you think of the numbers?

Responses:

your dropping out of med school???? -- nm - peglegpete Feb 9, 17:20 11
- Haha. No. They were talking to us about doing a joint program and getting an MBA. -- nm - James Bond (aka Igor) Feb 9, 17:21 10
  - couldn't you get gratis tuition? I mean, with an MD, couldn't you? -- nm - amanda "internet" jones Feb 9, 17:22 9
    - Does he have that yet? - the liioulu with more sun Feb 9, 17:24 1
      - I don't. -- nm - James Bond (aka Igor) Feb 9, 17:25
    - No, they charge for the MBA. I can get a free MPH. -- nm - James Bond (aka Igor) Feb 9, 17:24 6
      - but at another school? like, do you have to stay there? because you could get gratis tuition at another school, you know. -- nm - amanda "internet" jones Feb 9, 17:25 5
        
        I haven't heard of any schools giving free MBAs to MDs. - James Bond (aka Igor) Feb 9, 17:27 4
        
        sure, but everywhere has GAs. peter in the class of 2010 at penn state was an MD who had a GA. I had a GA. joe who studied turfgrass in undergrad had - amanda "internet" jones Feb 9, 17:30 3
        
        Got it. Thanks for the heads up. -- nm - James Bond (aka Igor) Feb 9, 17:32
        
        (and your sub loans are frozen while in school, so you only lose unsub interest.) -- nm - amanda "internet" jones Feb 9, 17:31 1
        
        Hehe.. my sub loans are only like $8k per year. A drop in the loan bucket. :) -- nm - James Bond (aka Igor) Feb 9, 17:33
but how much more can you expect to earn in 20 years with the MBA? because you need the net present value of those cash flows. money now is good, but - amanda "internet" jones Feb 9, 17:10 1
- Likely not much. But I can get the MBA later. - James Bond (aka Igor) Feb 9, 17:12
Community college. ;) -- nm - the liioulu with more sun Feb 9, 17:08
[deleted]
go for it! -- nm - cupixie Feb 9, 16:45 22
- What % should I say to discount the future salary? Current interest rate? Loan rate? -- nm - James Bond (aka Igor) Feb 9, 16:52 20
  - cost of capital. I'd use 12.9% per year for me. -- nm - amanda "internet" jones Feb 9, 17:00 18
    - (Can you explain a little more) -- nm - James Bond (aka Igor) Feb 9, 17:01 17
      - it's the annual value of the next-best investment of the cash. - amanda "internet" jones Feb 9, 17:07 13
        
        fwiw, the major miners use 6% for developed world, 10% for places with high country risk, and that's based on about a century of operational history. -- nm - mafic Feb 9, 17:38 2
        
        sure, because their roi is predictable based on history, and their portfolios are varied enough to mitigate some risk. - amanda "internet" jones Feb 9, 17:46 1
        
        absolutely. I'm just always fairly conservative with it. - mafic Feb 9, 17:52
        
        Why can't you say: I will have $10 in my account in 5 years. For me to get $10 in 5 years, I would need $9.06 in my account at 2% interest. - James Bond (aka Igor) Feb 9, 17:10 8
        
        sure, you can. but what interest rate do you use? isn't that what you asked? - amanda "internet" jones Feb 9, 17:19 7
        
        Oohhhh.. I see now. Sorry I got confused. You used the interest rate from credit cards. While I was thinking of an like a CD account. - James Bond (aka Igor) Feb 9, 17:23 3
        
        so like what I'm saying is "what would you get for the money if not spending it on tuition and interest? -- nm - amanda "internet" jones Feb 9, 17:24 2
        
        Right. Thank you. -- nm - James Bond (aka Igor) Feb 9, 17:25
        
        oops. it's a combination of the cost of your debt and your equity. I use credit card rates for me. YMMV. -- nm - amanda "internet" jones Feb 9, 17:25
        
        just give him the bottom line! -- nm - cupixie Feb 9, 17:20 2
        
        he's using like a bank interest rate. he has his answer. I use different numbers because I make different assumptions and have different risk toleranc -- nm - amanda "internet" jones Feb 9, 17:22 1
        
        Yes, makes sense. Thank you. -- nm - James Bond (aka Igor) Feb 9, 17:24
        
        wiki says it well. - amanda "internet" jones Feb 9, 17:09
      - dumb it down for him, cakey -- nm - cupixie Feb 9, 17:04 2
        
        I don't see you replying so I take it addition and subtraction are the far limits of your ability. :P -- nm - James Bond (aka Igor) Feb 9, 17:05 1
        
        i'm totally mathtarded. it's true -- nm - cupixie Feb 9, 17:17
  - I am guessing current interest. -- nm - James Bond (aka Igor) Feb 9, 16:59
- Does my logic work? -- nm - James Bond (aka Igor) Feb 9, 16:47

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So I just crunched the numbers of the MBA and wow.. it seems like a really BAD deal to do it now.

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