Davenport Inc. offers a new employee a single-sum signing bonus at the date of e

Question

Davenport Inc. offers a new employee a single-sum signing bonus at the date of employment. Alternatively, the employee can receive $34,000 at the date of employment and another $54,000 3 years later Assuming the employee's time value of money is 9% annually what single sim at the employment date would make her indifferent between the two options? (FV of $1, PV of S1, EVA of $1. PVA of $1. EVAD of $1 and PVAD of So (Use appropriate factorts) from the tables provided and round final answer to nearest whole dollar amount.) Multiple Choice 75.69

Explanation / Answer

The employee will receive $34,000 now and $54,000 after 3 years. The employee's time valuw of money is 9% annually.

The single sum at the employment date that will make the employee indifferent between the two options will be equal to the sum of $34,000 plus the present value of $54,000.

Therefore,

Single sum for the employee to be indifferent

= $34,000 + [$54,000 x PVIF (9%, 3)]

= $34,000 + [$54,000 x 0.7722]

= $75,698

Thus, the correct answer is $75,698.

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