Authors libby rittenberg 708
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the life of the asset. One’s education produces—or it can be expected to
produce—additional income over one’s working career.
Ronald Yeaple, a professor at the University of Rochester business school,
has estimated the net present value (NPV) of an MBA obtained from each
of 20 top business schools. The costs of attending each school included
tuition and forgone income. To estimate the marginal revenue product of a
degree, Mr. Yeaple started with survey data showing what graduates of
each school were earning five years after obtaining their MBAs. He then
estimated what students with the ability to attend those schools would
have been earning without an MBA. The estimated marginal revenue
product for each year is the difference between the salaries students
earned with a degree versus what they would have earned without it.
The NPV is then computed using Equation 13.5.
The estimates given here show the NPV of an MBA over the first seven
years of work after receiving the degree. They suggest that an MBA from
15 of the schools ranked is a good investment—but that a degree at the
other schools might not be. Mr. Yeaple says that extending income
projections beyond seven years would not significantly affect the analysis,
because present values of projected income differentials with and without
an MBA become very small.
While the Yeaple study is somewhat dated, a 2002 study by Stanford
University Graduate School of Business professor Jeffrey Pfeffer and
Stanford Ph.D. candidate Christina T. Fong reviewed 40 years of research
on this topic and reached the conclusion that, “For the most part, there is
scant evidence that the MBA credential, particularly from non-elite
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
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708
