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In: Finance

Your first job out of college will pay you $63,000 in year 1 (exactly one year...

Your first job out of college will pay you $63,000 in year 1 (exactly one year from today), growing at a rate of 2.9% per year thereafter. You will also receive a one time bonus of $41,000 at the same time as your first salary. You plan to retire in 38 years (you'll receive 38 years of salary). If the applicable discount rate is 6%, what is the present value of these future earnings today? Round to the nearest cent.

Solutions

Expert Solution

The  present value of these future earnings today = Cash Flows to be received * Present Value of Discounting Factor (Rate, Time)

= $ 1,413,067.11

Note:

Year Cash Flow Discounting Factor ( 6%) Present Value ( Cash Flow * DIscounting factor)
1 104000 0.943396226 98113.20755
2 64827 0.88999644 57695.79922
3 66706.983 0.839619283 56008.46924
4 68641.48551 0.792093663 54370.48571
5 70632.08859 0.747258173 52780.40546
6 72680.41916 0.70496054 51236.82757
7 74788.15131 0.665057114 49738.39204
8 76957.0077 0.627412371 48283.77869
9 79188.76092 0.591898464 46871.70592
10 81485.23499 0.558394777 45500.92961
11 83848.3068 0.526787525 44170.24205
12 86279.9077 0.496969364 42878.47082
13 88782.02502 0.468839022 41624.47781
14 91356.70375 0.442300964 40407.15817
15 94006.04816 0.417265061 39225.43939
16 96732.22356 0.393646284 38078.28032
17 99537.45804 0.371364419 36964.67023
18 102424.0443 0.350343791 35883.62799
19 105394.3416 0.33051301 34834.20113
20 108450.7775 0.311804727 33815.46506
21 111595.8501 0.294155403 32826.52222
22 114832.1297 0.277505097 31866.50128
23 118162.2615 0.261797261 30934.55644
24 121588.9671 0.246978548 30029.86658
25 125115.0471 0.232998631 29151.63463
26 128743.3835 0.219810029 28299.08683
27 132476.9416 0.207367952 27471.47202
28 136318.7729 0.195630143 26668.06105
29 140272.0173 0.184556739 25888.14605
30 144339.9058 0.174110131 25131.0399
31 148525.7631 0.16425484 24396.07552
32 152833.0102 0.154957397 23682.60539
33 157265.1675 0.146186223 22990.00089
34 161825.8574 0.137911531 22317.65181
35 166518.8072 0.130105218 21664.96577
36 171347.8526 0.122740772 21031.36771
37 176316.9404 0.115793181 20416.29941
38 181430.1316 0.10923885 19819.21895
Present Value 14,13,067.11

jeff jeffy answered 6 months ago
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