Prof. Nguyen taught the 3rd session of “Introduction to Finance” today and began the class with a group discussion on the case of “MBA degree decision”. The case was about Naomi, a fictional student who is planning to study MBA in Japan and has to choose either NUCB Business School or Waseda Business School to enroll in. Thus, the students made a timeline of the investments and returns for both MBA degrees to compare them and discussed which one is the better choice by presenting their arguments.
Choosing a MBA degree is always a decision that should be meticulously done by taking in account the return on investment that one can get. In Naomi’s case, who was 30 years old, one of the most important factor from a financial point of view was the increase in salary after a MBA in order to compensate the tuition fee of the degree and the time spent studying rather than working.
The former was about buying a house, with a comparison between monthly and annual payments; there is a difference between both due to compounding as every monthly payment also has an interest rate.
The latter was about the decision to either buy or rent a house: the monthly mortgage payments for buying a house need to be calculated and compared with the costs of renting a house. In this case, the monthly mortgage payments for buying the house were higher than the rental costs. Therefore, by buying and not renting, the person will not enjoy the benefit that would have been possible by renting (they could invest the costs of down payment, legal fees, etc. somewhere else) and that is known as opportunity cost.
The purpose of these cases were to introduce the concept of time value of money and to make better investment decisions.
This course serves to introduce basic financial concepts and knowledge, such as the time value of money, diversification and arbitrage, through case method teaching. Finance is a core in the business world and it helps students understand a vital part of the decision-making process taken not only in the corporate world but also in their personal life. While these case studies don’t always have fixed solutions, they offer the opportunity for students to make decisions based on sound financial assumptions after analyzing the situation in detail. Making such decisions based on analysis of all the available information is a crucial skill that's expected of candidates.