You?ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They

Question

You?ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They?ve offered you two different salary arrangements. You can have $77,000 per year for the next two years, or you can have $66,000 per year for the next two years, along with a $22,000 signing bonus today. The bonus is paid immediately, and the salary is paid in equal amounts at the end of each month, If the interest rate s 8 percent compounded monthly, what is the PV for both the options? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Explanation / Answer

Second option is Best.

PV of option>

PV = 132,030

PV of option Two =

113,169 + 20,000 = 133,169

A.

B.

And 20,000 bonus

Interest rate 8% Payment 154,000 Year 0 1 2 Payment 154,000 154,000 Present value factor 100% 93% 86% PV of payment 142,593 132,030

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