Question

Please can you explain the formulas?

You are 30 years old today and are considering studying for an MBA. You have just received your annual salary of $50,000 and expect it to grow by 3% per year (without earning an MBA). MBAs typically earn $80,000 per year upon graduation, with salaries growing by 4% per year.

The MBA program you're considering is a full-time, 2-year program that costs $30,000 per year, payable at the end of each study year. You want to retire on your 65th birthday, 35 years from today The relevant discount rate is 8%. Is it worthwhile for you to quit your job for two years in order to pursue an MBA?

Current salary	50,000	Growth Rate:	3%
MBA Starting Salary	80,000	Growth Rate:	4%
MBA Tuition	30,000	Discount rate:	8%
Age (at birthday)	Year	Normal Salary	PV of normal salary	MBA Tuition	MBA salary	PV of MBA tuition and salary
30	0
31	1
32	2
33	3
34	4
35	5
36	6
37	7
38	8
39	9
40	10
41	11
42	12
43	13
44	14
45	15
46	16
47	17
48	18
49	19
50	20
51	21
52	22
53	23
54	24
55	25
56	26
57	27
58	28
59	29
60	30
61	31
62	32
63	33
64	34
65	35
		Total Value		without MBA			with MBA

Answer 1

Age (at birthday)	year	Normal salary	growth	PV of normal salary	MBA tution	MBA salary	growth	PV factor@8%	PV of MBA tution and salary
30	0	50000						1
31	1	51500	1500	47685.19	30000	80000	3200	0.926	101851.85
32	2	53045	1545	45477.54	30000	83200	3328	0.857	97050.754
33	3	54636.35	1591.4	43372.1		86528	3461.12	0.794	68688.716
34	4	56275.44	1639.1	41364.13		89989.12	3599.56	0.735	66144.69
35	5	57963.7	1688.3	39449.12		93588.685	3743.55	0.681	63694.886
36	6	59702.61	1738.9	37622.77		97332.232	3893.29	0.63	61335.816
37	7	61493.69	1791.1	35880.98		101225.52	4049.02	0.583	59064.12
38	8	63338.5	1844.8	34219.82		105274.54	4210.98	0.54	56876.56
39	9	65238.66	1900.2	32635.57		109485.52	4379.42	0.5	54770.02
40	10	67195.82	1957.2	31124.67		113864.94	4554.6	0.463	52741.501
41	11	69211.69	2015.9	29683.71		118419.54	4736.78	0.429	50788.112
42	12	71288.04	2076.4	28309.46		123156.32	4926.25	0.397	48907.071
43	13	73426.69	2138.6	26998.84		128082.58	5123.3	0.368	47095.698
44	14	75629.49	2202.8	25748.89		133205.88	5328.24	0.34	45351.413
45	15	77898.37	2268.9	24556.82		138534.12	5541.36	0.315	43671.731
46	16	80235.32	2337	23419.93		144075.48	5763.02	0.292	42054.259
47	17	82642.38	2407.1	22335.67		149838.5	5993.54	0.27	40496.694
48	18	85121.65	2479.3	21301.61		155832.04	6233.28	0.25	38996.817
49	19	87675.3	2553.6	20315.43		162065.32	6482.61	0.232	37552.49
50	20	90305.56	2630.3	19374.9		168547.93	6741.92	0.215	36161.657
51	21	93014.73	2709.2	18477.91		175289.85	7011.59	0.199	34822.336
52	22	95805.17	2790.4	17622.45		182301.45	7292.06	0.184	33532.62
53	23	98679.33	2874.2	16806.6		189593.5	7583.74	0.17	32290.671
54	24	101639.7	2960.4	16028.51		197177.24	7887.09	0.158	31094.721
55	25	104688.9	3049.2	15286.45		205064.33	8202.57	0.146	29943.064
56	26	107829.6	3140.7	14578.75		213266.91	8530.68	0.135	28834.062
57	27	111064.5	3234.9	13903.81		221797.58	8871.9	0.125	27766.134
58	28	114396.4	3331.9	13260.11		230669.49	9226.78	0.116	26737.758
59	29	117828.3	3431.9	12646.22		239896.27	9595.85	0.107	25747.471
60	30	121363.1	3534.8	12060.74		249492.12	9979.68	0.099	24793.861
61	31	125004	3640.9	11502.38		259471.8	10378.9	0.092	23875.57
62	32	128754.1	3750.1	10969.86		269850.67	10794	0.085	22991.289
63	33	132616.8	3862.6	10461.99		280644.7	11225.8	0.079	22139.76
64	34	136595.3	3978.5	9977.643		291870.49	11674.8	0.073	21319.769
65	35	140693.1	4097.9	9515.715		303545.31	12141.8	0.068	20530.148
		Total value		833976.3	Without MBA				1519714.1

As per the calculation shown above it is advisible to pursue for the MBA.