Thursday, April 29, 2010

Last Post

This is it. This will be my last post. I am all but finished with my MBA. I have one last final this Thursday, and then we walk Saturday. Last Thursday I had my last official day of regular classes. It was a surreal and somewhat anti-climatic moment for me. Nevertheless, now as I am about to embark on a totally new challenge I wanted to look at my investment into getting an MBA, and evaluate whether or not it was a good or bad one. I will be using a NPV analysis, under the following assumptions.

  • Beginning with cost. I estimated the total cost of my loans by using a student loan calculator on the internet to see the total amount I will have paid by the time I finish paying off the debt in 20 years. I then split this amount into 20 equal yearly installments, and discounted it back to present using the risk free rate that corresponds to that year's expense (1 year rate for amount paid a year from now, 2 year rate for amount paid in two years, etc) . Using the risk free rate as the discount rate here is appropriate given this could be considered a discretionary expense. Once I discounted this amount back to present, I added the opportunity cost of being in school over the past two years, which was roughly a year and a half's salary. Adding these parameters together gave me total cost.
  • Cash flow estimation. I made a lot of assumptions here. First off, the future cash flows I projected are the future differences between the salaries of what I probably would have made pre-MBA compared to what I am likely to make having completed an MBA, until age 67. To estimate these two salary amounts into the future, I started with what I was making before the program, and what I will be making once I get out. I included yearly increases of 1% each year, mostly to cover inflation (although, according to Dr. Rennie, this is a drastically undervalued estimate of future inflation, as we will all be burning dollar bills to stay warm sometime in the near future). At each five or six year interval I estimated a raise or promotion in each stream of future salaries, with a 5% increase in pre-MBA salary vs. an 8% increase in post-MBA salary. In each stream of salaries I stopped increasing the amount toward my golden years (as I start going insane). This happened at age 55 in my pre-MBA salary, and at age 60 in my post-MBA salary.
  • The discount rate. This is definitely the biggest assumption I had to make. Looking on the internet for an appropriate discount rate for increases in salary due to acquiring an MBA was nearly impossible. One study used a discount rate equal to the treasury rate, which was pretty stupid in my opinion, while a handful of other studies used a variety of different rates for no apparent reason what-so-ever. So, I decided to use a multitude of rates, starting with 6%, and increasing 2% until reaching 16%. If I had to guess, I would say something around 10 or 12% seems the most appropriate. Results found below.
So, from a purely financial standpoint, it is easy to see that my investment into obtaining an MBA was a good one. As always when preforming an NPV analysis, the results are dependent on the quality of the assumptions, and although all of my assumptions aren't completely sound, I kept a fairly conservative tone throughout so I feel good about it. However, this valuation does not capture all the intangible benefits I gained throughout this entire experience. I have just spent 18 months surrounded by some of the smartest people I have ever worked with, and made some really good friends along the way. So, considering those added benefits, I would say I have drastically underestimated the value of obtaining a Walton MBA.

So, after it's all said and done, would I recommend that someone go back to school and pursue an MBA? My answer, NO WAY. After all, the value of my degree decreases as more and more people earn MBAs. But, if someone was dead set on it, I would totally recommend the University of Arkansas. It is a great school that has great people associated with it.

One last thing, thanks to my wife. She deserves an honorary degree and apologies from most of my professors for what she has had to endure throughout this experience.

Good luck to everyone as they do whatever they are doing.

Sunday, April 25, 2010

This is my last Sunday of studying. I will be glad to have them back. Before entering the MBA program, Sundays were my favorite day of the week. It was a day to just relax, watch some movies, do a little laundry, wash the dog, etc. Kind of like a catch-all day. Since graduate school started though, Sundays have been a day of doing large amounts of homework and studying like crazy. I actually should be studying right now for an exam in ERP tomorrow, but I am having a really difficult time staying focused. Mostly because ERP is super boring, well, studying for an ERP test is super boring.

Anyway, just three tests and two presentations left before it is all over. I can't wait, I am ready for the next challenge/phase of my life to begin.

Friday, April 16, 2010

25th

The University of Arkansas Full-time MBA program was recently ranked 25th of all public graduate schools by Us News and World Report. This is a huge deal. Not only were we ranked 25th in the nation, but we are 3rd in the SEC, and 1st in the SEC West. The ranking is based on information from our class concerning GPA, GMAT, work experience, etc. So, that is a pretty cool feeling.

This ranking really speaks to the quality of education you receive when getting a Walton MBA. As I have said, I have been very impressed with the professors, administration and fellow classmates throughout this whole experience. It's nice to see others recognizing that as well.

Currently, I am in a weird place. I just got over a crazy couple weeks, and now I am about to enter a crazy couple weeks. But, over the past couple days, things have been relatively calm. It's nice, but also annoying. I would rather just finish up everything and relax later.

Wednesday, April 14, 2010

Payback

Today, I will have my exit interview for the Walton MBA program. Honestly, my experience has been about 98% good, and that is more than one can hope for going into a graduate program. I have learned a ton, met some really interesting and smart people, and I am definitely better prepared for a career in business than I was coming into the program (by a large amount). So, on most fronts and considering my biggest requirements coming into the program, I am very satisfied. However, that doesn't mean I don't see any areas that could be improved on, and these are the exact areas I intend to bring up in my exit interview today. Hopefully, by doing this, the program can be improved on even further.

Three weeks from tomorrow. That's it. It will all be over three weeks from tomorrow. Between now and then, I have a huge presentation to present to a board of Wal*Mart executives, an ERP report and presentation, one more take home finance test (probably going to be brutal), one ERP exam and one more strategy test. It's not going to be fun, but at least that's all that's left.

Sunday, April 11, 2010

Sunday Mornings

In four weeks time, I will have Sundays back. Since starting grad school over a year ago, Sundays have been a day to get as much homework done as possible. I try to start around 9 in the morning, and will work on stuff until dinner. Today is no different. I am going to try and get a strategy assignment done, work on an ERP assignment, and read over a rough draft of my advanced finance course project. Getting as much done as possible today is important since the coming week is going to be busy putting some finishing touches on our Wal-Mart project for strategy. We present to the Wal-Mart strategy group the week after next, so we need to be as prepared as possible.

Anyway, I need to finish my coffee and get to it......ugh. It's too nice outside to be stuck inside thinking about business.

Wednesday, April 7, 2010

I have been guilty of blog neglection as of late, but I have some pretty good excuses. Assignments in ERP have taken up some considerable time, and we have been putting the finishing touches on our quarterly holdings report for the Shollmier fund. But those were the easier assignments. I just spent all of last weekend working on an Advanced Corporate Finance test. It was freaking brutal. I worked over 12 hours on the thing. As I have always said, I am not a fan of take-home or open-book test, they are always way harder than regular tests. But the good news is that after last week, and this week, and the next week, I will have turned a pretty significant corner in totally completing my MBA. My last final is less than a month away, and graduation is a month from tomorrow. Holy crap. Well, gotta go, ERP starts in less than an hour.