## Monday MBA Math: Marginal Analysis by Table

The Monday MBA Math series helps prospective MBA students to self assess their proficiency with the quantitative building blocks of the MBA first year curriculum.

Marginal analysis yields insight into the optimal production quantity, and corresponding profit, by examining whether each additional quantity sold generates more revenue than it costs to produce. Many students new, or newly returned, to economics have trouble applying this simple concept, usually much to their own surprise and frustration.

Marginal analysis serves as a great introduction to how economics can be presented with data, formulas, and charts. Beginning students typically find one or two of these approaches intuitive but struggle with the other(s), finding it hard to accept that they are equivalent.

This exercise presents a simple table-based exercise whose solution will be presented from both total and marginal perspectives. We'll revisit marginal analysis with formulas and calculus in subsequent Monday MBA Math sample exercises.

**Exercise**:

Global Corp. sells its output at the market price of $13 per unit. Each plant has the costs shown below:

Units of Output |
Total Cost ($) |

0 |
6 |

1 |
9 |

2 |
15 |

3 |
24 |

4 |
36 |

5 |
51 |

6 |
69 |

7 |
90 |

How much output should each plant produce?

**Solution (with audio commentary)**: click here

*Prof. Peter Regan created the self-paced, online MBA Math quantitative skills course and teaches live MBA courses at Dartmouth (Tuck), Duke (Fuqua), and Cornell (Johnson).*

## Oregon (Lundquist) Chooses MBA Math

University of Oregon's Lundquist College of Business purchased MBA Math subscriptions for the second year for all incoming Oregon MBA program students.

## Quant Skill Prep Surge Starting

Schools and individual admitted students are turning their attention to quant skills preparation. The especially proactive and/or anxious incoming students are busy now with the MBA Math quantitative skills course, with the trickle expected to become a flood as June turns to July.

Prepare while you can; your arrival on campus will rush at you sooner than many think.

## Penn State (Smeal) Chooses MBA Math

Penn State's Smeal College of Business purchased MBA Math subscriptions for the third year for all executive MBA program students.

## Virginia Tech (Pamplin) Recommends MBA Math

Pamplin College of Business recommends MBA Math for the second year for admitted students who need quantitative skills preparation.

## Colorado Boulder (Leeds) Chooses MBA Math

Leeds School of Business recommends MBA Math for the second year for admitted students who need quantitative skills preparation.

## Monday MBA Math: Balance Sheet Update

The Monday MBA Math series helps prospective MBA students to self assess their proficiency with the quantitative building blocks of the MBA first year curriculum.

Balance sheets provide a snapshot of the financial condition at a moment in time of an organization, whether it be your favorite coffee shop or the struggling titans of Wall Street. This exercise focuses on the high-level structure and logic of a balance sheet.

**Exercise**:

Use the starting balance sheet and the list of changes to create an updated balance sheet and to answer the question.

Ruston Company |
|||

Cash |
3,300 |
Liabilities |
5,100 |

Other Assets |
3,000 |
Equity |
1,200 |

Total Assets |
6,300 |
Total Liabilities & Equity |
6,300 |

Between January 1 and March 31, 2009:

1. Cash decreases by $300,000

2. Other Assets decrease by $200,000

3. Equity increases by $400,000

What is the value for Liabilities on March 31, 2009?

**Solution (with audio commentary)**: click here

*Prof. Peter Regan created the self-paced, online MBA Math quantitative skills course and teaches live MBA courses at Dartmouth (Tuck), Duke (Fuqua), and Cornell (Johnson).*

## Melbourne Chooses MBA Math

Melbourne Business School purchased MBA Math subscriptions for the second year for all incoming full-time and part-time MBA program students.

## Georgetown (McDonough) Chooses MBA Math

Georgetown's McDonough School of Business purchased MBA Math subscriptions for all incoming students in the full-time, evening, and executive MBA programs. This is the fourth year for the full-time and evening programs, the third year for the international executive program, and the second year for the Georgetown-ESADE executive program.

## Georgia State (Robinson) Chooses MBA Math

Georgia State's Robinson College of Business recommends MBA Math for admitted students who need quantitative skills preparation.

## Tight Job Market Affects Quant Prep Needs? Prepare and Network

Here's a response from Michael Shannon, first year at Notre Dame's Mendoza College of Business, to my question about whether the tight recruiting market affects the recommending quantitative skills preparation for incoming students:

I suppose that the tighter recruiting market does affect the level of quant preparation. With more people vying for a limited number of internships and full time jobs, one wrong answer to a quantitive interview question could hurt you. However, I would still advise to anyone that any job opportunity is a result of the effort you put into it. If you work hard enough to gain the network, you will get the interview or offer.

## Between Admission and School: Basics and Excel for Notre Dame

Here's a response from Michael Shannon, a first year at Notre Dame's Mendoza College of Business, to my question about what students wish they had known in the spring before starting b-school about how best to use the time between admission and arrival on campus:

One thing I wish I had known in the spring before I started the MBA program was how important some of the basic classes are to your success within your respective program. Finance, Economics, Accounting, and Marketing cover some extremely important topics that will be used in many of the other classes taken later in your program. I think it is vitally important to gain mastery of such terms as discounted cash flows, price elasticity, present value, breakeven, contribution margin, etc.

The preparation that I found most useful was to try to gain familiarity with Excel before you start if you do not have this already. Having this knowledge will allow you to have an edge in the classroom because you will not have to spend as much time just trying to figure out the computer program, as opposed to trying to figure out the solution to the problem or case.

## Use MBA Math to Arrive Prepared at Chicago (Booth)

Here is a testimonial from Joshua Izzard, finishing up his MBA at Chicago's Booth School and member of the MBA Math Board of Advisors, looking back at the MBA Math quantitative skills course:

I have just looked at the modules included in the MBA Math program and after going through Chicago Booth I am equally impressed with how correctly you chose and built the program for incoming students.

I reminded myself that I was incredibly busy when preparing to move to Chicago and the critical thing was to be really prepared for the

beginningof class.That being said, the fire hydrant that a Chicago MBA is trying to drink from gives very little time to review additional fundamental material during the MBA, and if you are reviewing it-- you're likely giving up on time that needs to be spent building relationships.

## Baylor (Hankamer) Recommends MBA Math

Hankamer School of Business recommends MBA Math for admitted students who need quantitative skills preparation.

## Monday MBA Math: Time Value of Money (Annual)

Quantitative finance is built on a foundation of time value of money relationships that allow a single amount of money at one point in time to be converted into an equivalent amount of money at a different point in time given a specified time period and applicable rate.

This rate is typically referred to as an interest rate (when moving forward in time) or discount rate (when moving backward). Sometimes we're wondering how investments will grow over time. Other times we're wondering what future cash flows are worth today or how much we should invest today to meet future obligations.

**Exercise**:

A zero-coupon bond is a security that pays no interest, and is therefore bought at a substantial discount from its face value. Using a discount rate of 8%, how much would you pay today for a zero coupon bond with a face value of $2,300 that matures in 7 years?

**Solution (with audio commentary)**: click here

*Prof. Peter Regan created the self-paced, online MBA Math quantitative skills course and teaches live MBA courses at Dartmouth (Tuck), Duke (Fuqua), and Cornell (Johnson).*