Question

Your first job out of college will pay you $70,000 in year 1 (exactly one year from today). You estimate that your salary will grow at 9% per year for 40 years (compounded annually), when you'll stop working. If the applicable discount rate is 15%, what is the present value of these future earnings today? Round to the nearest cent.

Answer 1

Year	Salary	PV F at 15%	Present value
1	70000	0.869565	60869.57
2	76300	0.756144	57693.76
3	83167	0.657516	54683.65
4	90652.03	0.571753	51830.59
5	98810.71	0.497177	49126.39
6	107703.7	0.432328	46563.27
7	117397	0.375937	44133.88
8	127962.7	0.326902	41831.25
9	139479.4	0.284262	39648.75
10	152032.5	0.247185	37580.12
11	165715.5	0.214943	35619.41
12	180629.8	0.186907	33761.01
13	196886.5	0.162528	31999.57
14	214606.3	0.141329	30330.02
15	233920.9	0.122894	28747.59
16	254973.8	0.106865	27247.71
17	277921.4	0.092926	25826.09
18	302934.3	0.080805	24478.65
19	330198.4	0.070265	23201.5
20	359916.3	0.0611	21990.99
21	392308.8	0.053131	20843.63
22	427616.5	0.046201	19756.14
23	466102	0.040174	18725.38
24	508051.2	0.034934	17748.4
25	553775.8	0.030378	16822.4
26	603615.6	0.026415	15944.71
27	657941.1	0.02297	15112.81
28	717155.7	0.019974	14324.32
29	781699.8	0.017369	13576.96
30	852052.7	0.015103	12868.6
31	928737.5	0.013133	12197.19
32	1012324	0.01142	11560.82
33	1103433	0.009931	10957.65
34	1202742	0.008635	10385.94
35	1310989	0.007509	9844.067
36	1428978	0.006529	9330.463
37	1557586	0.005678	8843.657
38	1697768	0.004937	8382.248
39	1850568	0.004293	7944.914
40	2017119	0.003733	7530.397
Present value of salaries			1029864
Note:
Each year salary is computed as under:
Salary of current year = salary of previous year + 9%