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Your first job out of college will pay you $68,000 in year 1 (exactly one year...

Your first job out of college will pay you $68,000 in year 1 (exactly one year from today), growing at a rate of 2.6% per year thereafter. You will also receive a one time bonus of $48,000 at the same time as your first salary. You plan to retire in 36 years (you'll receive 36 years of salary). If the applicable discount rate is 7%, what is the present value of these future earnings today? Round to the nearest cent.

Solutions

Expert Solution

Answer: $ 1,249,478.54

Note:

Year Cash Flow Discounting Factor( 7%) Present Value ( Cash Flow * Discounting Factor)
1 116000 0.934579439 108411.215
2 69768.000000000 0.873438728 60938.07319
3 71581.968000000 0.816297877 58432.2085
4 73443.099168000 0.762895212 56029.38871
5 75352.619746368 0.712986179 53725.37647
6 77311.787859774 0.666342224 51516.10865
7 79321.894344128 0.622749742 49397.68923
8 81384.263597075 0.582009105 47366.38238
9 83500.254450599 0.543933743 45418.60591
10 85671.261066315 0.508349292 43550.92492
11 87898.713854039 0.475092796 41760.04576
12 90184.080414244 0.444011959 40042.81024
13 92528.866505014 0.414964448 38396.19
14 94934.617034144 0.387817241 36817.28126
15 97402.917077032 0.36244602 35303.2996
16 99935.392921035 0.338734598 33851.57513
17 102533.713136982 0.31657439 32459.54774
18 105199.589678543 0.295863916 31124.7626
19 107934.779010186 0.276508333 29844.86582
20 110741.083264450 0.258419003 28617.60031
21 113620.351429326 0.241513087 27440.80179
22 116574.480566489 0.225713165 26312.39499
23 119605.417061217 0.210946883 25230.38996
24 122715.157904809 0.19714662 24192.8786
25 125905.752010334 0.184249178 23198.03125
26 129179.301562603 0.172195493 22244.09352
27 132537.963403230 0.160930367 21329.38313
28 135983.950451714 0.150402212 20452.287
29 139519.533163459 0.140562815 19611.25838
30 143147.041025709 0.131367117 18804.81411
31 146868.864092377 0.122773007 18031.53203
32 150687.454558779 0.114741128 17290.04847
33 154605.328377307 0.107234699 16579.05583
34 158625.066915117 0.100219345 15897.30026
35 162749.318654910 0.093662939 15243.5795
36 166980.800939938 0.087535457 14616.74072
Present Value 12,49,478.54

jeff jeffy answered 6 months ago
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