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Old July 9th, 2012, 10:16 AM
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NPV is stands for what? Please tell me about the NPV of MBA course. Can you tell me how to calculate the NPV of MBA? provide me the information soon.

NPV stands for Net Present Value (NPV). As per you have asked about the master's degree of business administration (MBA), this course is a stepping stone for those candidate who want to take admission in Higher class. But, during the last decade MBA has became a bit more accessible, to a younger class. Here I’m telling you about how to calculate NPV of MBA. Take an example of a person:

Age 27
Present Salary INR 500000
Age of retirement 60 Years
Return on alternate investment opportunity, r 10 %

First, now we will calculate the NPV when MBA is not pursued. We can also call this calculation PV (No MBA):

C1= Current Salary
C1 (1+Gt) = salary during subsequent years
t = 1, 2….32
GT=growth rate, which is 5 %

PV (No MBA) = C1+ C1 (1+G1) / (1+r) +…..C1 (1+G32) / (1+r)^32 = C(1+G) [ 1-(1+G)^32 / (1+r)^32] / [ r – G]
500000 + 500000(1+0.05) / 1.1 +….+ 500000(1+0.05)/ (1.1)^32 = INR 9017000

Now we will learn how to calculate the NPV during the career when MBA is pursued.

Starting Salary after MBA, C2 INR 800000
Expected growth rate of income, GT 7%
Retirement Age 60 Years
Cost of MBA at ISB = INR 1500000
PV (MBA) = -1500000 + C2 (1+G1) / (1+r)+…..+ C2(1+G31)/(1+r)^31 = -1500000 + 800000/(1.1) + 800000 (1+0.07) / (1.1)^2+………+ 800000 (1+ 0.07) / (1.1)^31 = INR 15380000
NPV of investment = PV (MBA) Less PV (No MBA) = INR 6368000

Last edited by Gunjan; July 1st, 2019 at 03:36 PM.
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