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 for years. Your discount rate is 11 percent. What is the present value of your offer?

-$1,428,726.78

-$1,427,488.04

-$1,433,232.96

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Expert Solution

It is given that Bonus of $12,500 is received immediately, therefore, present value of this bonus will be equal to the amount received. Further, Annual salary will receive at year end with bonus of 10% every year. Salary will grow @4%, therefore, each year's salary is calculated by multiplying previous year's salary with 104%. Salary will be received for total 30 years along with bonus. Total present value of offer with 11% discount rate worked out as per the information given is $1,226,408.67.

Calculation done in excel is given below -

Calculation and formula used in above worksheet is shown below -

I hope above answer will help you in your task.

jeff jeffy answered 7 months ago

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