TAILIEUCHUNG - Estimating the Internal Rate of Return on an MBA: A Comparison of the Return from Top-Ranked & Second-Tier Programs

Some consider their job to be to simply listen to what others have to say and then bring that information back to their client. Sleuthing for a company is an increasingly popular career choice. The SCIP says that its membership has more than doubled in the last six years. 14 And . companies spend a total of $1 billion a year on competitive intelligence programs. 15 This is in contrast to the $45 billion that Fortune 100 companies lost to thefts of proprietary information in 1999. This amount continues to increase. But since “successful corporate espionage doesn’t. | JOURNAL OF ECONOMICS AND FINANCE EDUCATION Volume 10 Number 1 Summer 2011 67 Estimating the Internal Rate of Return on an MBA A Comparison of the Return from Top-Ranked Second-Tier Programs John B. White. Morgan P. Miles and Roger M. White1 ABSTRACT An MBA is frequently touted as a ticket to financial success. Top ranked programs often promote the starting salaries of their graduates with the implication that investing time and money in their MBA program will produce a significant return. This study estimates the internal rate of return for the top 30 MBA programs and 15 second-tier MBA programs in the United States by comparing cost of acquiring the degree with the incremental post-MBA income over an expected work life of 40 years. The rates of return range from 11 percent to over 40 percent with the rates of return not significantly correlated to a program s ranking. Introduction The master of business administration MBA is acknowledged to be a very valuable degree especially if it comes from a top-ranked university. It is not uncommon for the starting salary of an MBA to be nearly twice that of an undergraduate from the same institution. This is an incredible increase in income from a two-year degree that is not the result of significant career shift. Consequently applicants covet admission slots in top ranked programs as they are viewed as tickets to the fast track of financial success. Universities likewise seek to be included in the top ranked or best list because an unbiased third party endorsement is the most effective marketing. A high ranking also increases the number of qualified applicants for the university to select from which tends to further enhance an MBA program s reputation. However when analyzing the financial value of an MBA the starting salary of the graduate is only part of the equation. The value added by the degree is the function of the differential between the pre-MBA salary and the post-MBA salary. This is somewhat analogous to the .

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