1. Comparing Jobs Mr. A, an Indian national has got two job offers after complet
ID: 2660393 • Letter: 1
Question
1. Comparing Jobs
Mr. A, an Indian national has got two job offers after completing his MBA degree. One offer is from an Indian
company and pays him 10,000,000 INR (Indian Rupees) annually.The other offer is from a company in Singapore and pays him 80,000 SGD (Singapore Dollars) per year. Due to family committments,
MR A. can not stay away from India for more than 3 years. The exchange rate between INR and Singapore
Dollars is expected to be 50 INR/SGD after one year, 55 INR/SGD after two years and 45 INR/SGD after two years and 45 INR/SGD55 INR/SGD after two years and 45 INR/SGD after three years. MR A. needs to support his family
to the extent of 4,00,000 INR per year. His personal consumption needs equal 10 consumption baskets
irrespective of where he stays. If Mr.A takes up the job in Singapore, then after 3 years he would like to convert
all his savings in SGD to INR. The price level in India and Singapore will be constant over next 3 years and
it will be 20,000 INR per basket in India and 5000 SGD in Singapore.
a) Compute the total savings Mr A can accumulate over the span of 3 years if he decides to work in Singapore.
b) Compute total savings MR A can accumulate over the span of 3 years if he decides to work in India.
c) Which job offer should he accept from a financial perspective? (Hint: try to see in which job he saves more)
Please Explain/show all steps to solving the questions. Thanks!
Explanation / Answer
the total savings Mr A can accumulate over the span of 3 years if he decides to work in Singapore:
year 1:
salary: 80,000
basket cost : 5000*10= 50,000 SGD
transfer made to India for family: 400,000INR/50 ( amt divided by exchange rate at the end of year) = 8000 SGD
total saving: 80000-50000-8000= 22000
year 2:
salary: 80,000
basket cost : 5000 SGD
transfer made to India for family: 400,000INR/55 ( amt divided by exchange rate at the end of year) = 7273 SGD
total saving: 80000-50000-7273= 17727
year 3:
salary: 80,000
basket cost : 5000 SGD
transfer made to India for family: 400,000INR/45 ( amt divided by exchange rate at the end of year) = 8889 SGD
total saving: 80000-5000-8889= 22111
total saving at the end of three years = 22000+17727+22111 = 61838SGD
total saving in INR : 61838 * 45 ( amt multiplied by exchange rate at the end of year) = 2782710
total savings MR A can accumulate over the span of 3 years if he decides to work in India.:
salary: 10,00,000
basket cost : 20000*10=200,000
transfer made for family: 400,000INR
total saving: 10,00,000-200,000-400,000 = 400,000
total saving at the end of three years : 400, 000 * 3 = 1200,000 INR
c) Which job offer should he accept from a financial perspective?
singapore
he will have a net saving of 1582710 INR
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