Question

In: Finance

You are considering two job offers that are equivalent in everyway except for the bonus....

You are considering two job offers that are equivalent in every way except for the bonus. Alpha Industries offers a bonus paid on the first day of $15,000 and Zeta Consolidated offers a bonus paid at the end of the first year of $15,500. You assume you can earn 4.25% on a 1-year investment. The more valuable choice is:

   A.   Zeta Consolidated.

    B.   Alpha Industries.

    C.   The value of the bonuses is equivalent.

Solutions

Expert Solution

We will discount the value of the bonus from Zeta Consolidated to find it's present value.

Present value = future value / (1+i)^n

Present value = $15,500/1.0425

Present value = $14,388.48921

As $15,000 > $14,388.47921

The more valuable choice is-

B. Alpha industries

jeff jeffy answered 2 years ago
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