You have just been offered a job. Your base salary will be $90,000 per year and...

You have just been offered a job. Your base salary will be $90,000 per year and the first year’s annual salary will be received one year from the day you start working. You receive a bonus immediately of $12,500. Your salary will grow 4 percent per year and you will receive a bonus of 10 percent of your salary. You expect to work 30 foryears. Your discount rate is 11 percent. What is the present value of your offer?

Group of answer choices

A. $1,428,726.78

B. $1,427,488.04

C. $1,433,232.96

Solutions

Expert Solution

Year	Salary this year(A)	Growth factor(B)	Salary next year C= (A)*(B)	Bonus( 10 % of years salary for all years other than 0) (D)	Total cash flow E= (A+D)	Discount factor (F)	PV of cash flow (E/F)
0				12500	12500	1	12500
1	90000	(1+0.04)	93600	9000	99000	1.11	89189.2
2	93600	(1+0.04)	97344	9360	102960	1.2321	83564.7
3	97344	(1+0.04)	101237.76	9734.4	107078	1.36763	78294.8
4	101238	(1+0.04)	105287.27	10123.78	111362	1.51807	73357.3
5	105287	(1+0.04)	109498.76	10528.73	115816	1.68506	68731.2
6	109499	(1+0.04)	113878.71	10949.88	120449	1.87042	64396.8
7	113879	(1+0.04)	118433.86	11387.87	125267	2.07616	60335.7
8	118434	(1+0.04)	123171.21	11843.39	130277	2.30454	56530.8
9	123171	(1+0.04)	128098.06	12317.12	135488	2.55804	52965.8
10	128098	(1+0.04)	133221.99	12809.81	140908	2.83942	49625.6
11	133222	(1+0.04)	138550.87	13322.2	146544	3.15176	46496
12	138551	(1+0.04)	144092.9	13855.09	152406	3.49845	43563.8
13	144093	(1+0.04)	149856.62	14409.29	158502	3.88328	40816.6
14	149857	(1+0.04)	155850.88	14985.66	164842	4.31044	38242.6
15	155851	(1+0.04)	162084.92	15585.09	171436	4.78459	35830.9
16	162085	(1+0.04)	168568.31	16208.49	178293	5.31089	33571.3
17	168568	(1+0.04)	175311.04	16856.83	185425	5.89509	31454.2
18	175311	(1+0.04)	182323.49	17531.1	192842	6.54355	29470.6
19	182323	(1+0.04)	189616.43	18232.35	200556	7.26334	27612.1
20	189616	(1+0.04)	197201.08	18961.64	208578	8.06231	25870.8
21	197201	(1+0.04)	205089.13	19720.11	216921	8.94917	24239.3
22	205089	(1+0.04)	213292.69	20508.91	225598	9.93357	22710.7
23	213293	(1+0.04)	221824.4	21329.27	234622	11.0263	21278.5
24	221824	(1+0.04)	230697.37	22182.44	244007	12.2392	19936.6
25	230697	(1+0.04)	239925.27	23069.74	253767	13.5855	18679.3
26	239925	(1+0.04)	249522.28	23992.53	263918	15.0799	17501.3
27	249522	(1+0.04)	259503.17	24952.23	274475	16.7387	16397.7
28	259503	(1+0.04)	269883.3	25950.32	285453	18.5799	15363.6
29	269883	(1+0.04)	280678.63	26988.33	296872	20.6237	14394.7
30	280679	(1+0.04)	291905.78	28067.86	308746	22.8923	13486.9
					PV of offer	sum=	1226409

where discount factor = (1+ 11/100)^n

discounted cash flow = total cashflow/discount factor

jeff jeffy answered 15 hours ago

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