A. Jenna lives in Madison, New Jersey where the cost of living index is 1.14. Pe

Question

A. Jenna lives in Madison, New Jersey where the cost of living index is 1.14. Peabody Incorporated will be relocating Jenna to Frankfurt where the cost of living index is 1.28. If Jenna’s salary is $79,000, what would her adjusted salary level be in U.S. dollars?

B. Josie lives in the Washington, D.C. branch of Peabody Incorporated, and is accepting a foreign assignment in Athens, Greece. Jose currently makes $100,000. The COL index (with D.C. = 100) in Athens is 98. However, the U.S. State Department estimates that the average American needs a house allowance of $22,500 to maintain the same standard of housing as one could find in the U.S. In addition, due to the current conditions of health care and safety in Athens, the State Department suggests hardship pay of 10%. How much will Josie need to earn in order to remain at the same standard of living she currently enjoys in the U.S.?

Explanation / Answer

A. Adjusted Salary Level = ($79,000/1.14)*1.28 = $88,701.75

B. Here, adjusted salary level should be = ($100,000/100)*98 = $98,000.

However, the person has to pay the same house allowance of $22,500.

Disposable Income of Josie in US = $100,000 - $22,500 = $77,500.

Assuming, Josie doesn't get any house allowance in US, we will proceed ahead.

Income = $98,000 + $22,500 = $120,500

Hardship pay = 10%*$98,000 = $9,800

Total Pay = $120,500 + $9,800 = $130,300

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