Question

In: Finance

Joe Masters has received a job offer from a large wine retailer. His base salary will...

Joe Masters has received a job offer from a large wine retailer. His base salary will be $136,500. He will receive his first annual salary payment one year from the day he begins work. He will also get an immediate $50,000 bonus for joining the company. His salary will grow at 5 percent each year, starting after the first year. Mr. Masters is expected to work for 15 years. What is the present value of the offer if the discount rate is 7.1 percent?

Solutions

Expert Solution

Let's arrange the cash flows that Joe Masters will be receiving from the offer and then calculate the Present Value.

The picture below is the extract of excel that calculates the present value of all the payments receivable.


We can also compute the NPV in excel using the NPV function. What you need to just keep in mind is that the first payment received today need not be used to compute the PV. It will be added to the PV derived from Year 1 onwards.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Joe Masters has received a job offer from a large wine retailer. His base salary will...
Joe Masters has received a job offer from a large wine retailer. His base salary will be $136,500. He will receive his first annual salary payment one year from the day he begins work. He will also get an immediate $50,000 bonus for joining the company. His salary will grow at 5 percent each year, starting after the first year. Mr. Masters is expected to work for 15 years. What is the present value of the offer if the discount...
Joe Masters has received a job offer from a large wine retailer. His base salary will...
Joe Masters has received a job offer from a large wine retailer. His base salary will be $100,000. He will receive his first annual salary payment one year from the day he begins work. He will also get an immediate $50,000 bonus for joining the company. His salary will grow at 4 percent each year, starting after the first year. Each year he will also receive a bonus equal to 5 percent of his salary. Mr. Masters is expected to...
Dina has received a job offer from Amegy bank as branch manager. Her base salary will...
Dina has received a job offer from Amegy bank as branch manager. Her base salary will be $50,000 today. Assuming for simplicity that she will receive $50,000 today and her next annual salary with the appropriate increment one year from today. Her increment will be 5 percent each year if she performs well in the bank. Each year she will receive a bonus equal to 10 percent of her salary and her first bonus will be one year from today...
Mary has received a job offer from a large investment bank as an assistant to the...
Mary has received a job offer from a large investment bank as an assistant to the vice president. Her base salary will be $60,000 today. Assuming for simplicity that she will receive her first annual salary payment with the appropriate increment one year from the day she begins to work. In addition, she will get an immediate $20,000 bonus for joining the company today. Her salary will grow at 3 percent each year. Each year she will receive a bonus...
Nancy received a job offer. The annual salary is $90,000. For simplicity, assume she gets paid...
Nancy received a job offer. The annual salary is $90,000. For simplicity, assume she gets paid once a year at the end of each year. The salary is expected to increase 5% per year. If she works at the company for 28 years and the appropriate discount rate is 9% what is the present value of this offer?
1.Joe is the owner of a large farm, and Joe wants to be certain that his...
1.Joe is the owner of a large farm, and Joe wants to be certain that his farm will continue to be used for agricultural purposes after his death. Since none of Joe’s children are interested in maintaining the farm, Joe decides to sell his farm to Lou on condition that Lou uses the farm for agricultural purposes. If Lou fails to do so, ownership of the farm will instantly transfer to a charitable organization called the Farming Preservation Society. What...
In 2017 Michael has $90,000 in salary from his full-time job and net self-employment income of...
In 2017 Michael has $90,000 in salary from his full-time job and net self-employment income of $40,000 from his sole proprietorship. What is his self-employment tax? How much of it can he deduct in arriving at his AGI? Show and label calculations.
Dale Masters and two of his colleagues are considering opening a law office in a large...
Dale Masters and two of his colleagues are considering opening a law office in a large metropolitan area that would make inexpensive legal services available to those who could not otherwise afford these services. The intent is to provide easy access for their clients by having the office open 360 days per year, 16 hours each day from 7:00 a.m. to 11:00 p.m. The office would be staffed by a lawyer, paralegal, legal secretary, and clerk-receptionist for each of the...
1. On January 2017, Tom received a job offer from XYZ Inc. Tom was very happy...
1. On January 2017, Tom received a job offer from XYZ Inc. Tom was very happy with the offer as in addition to the starting salary of $120,000 the company also provided the use of a company car and Tom was eligible for a low interest employee loan. Tom accepted the offer of employment from XYZ Inc. and also accepted the use of the company car. It is now March 2018, Tom has received his T4 to prepare his personal...
Kevin is single. In 2017, he earned $65,000 in salary this year from his employer and received $10,000 in alimony from his ex-wife.
Kevin is single. In 2017, he earned $65,000 in salary this year from his employer and received $10,000 in alimony from his ex-wife. His employer withheld $9,000 in tax from his salary this year. In addition to the above, the following occurred this year:- He decided he did not like his nose. So he paid $2,000 in cosmetic surgery to make it larger and more defined.- He paid $2,500 in union dues and for subscriptions to publications related to his...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT