You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They
ID: 2613642 • Letter: Y
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 $85,000 per year for the next two years, or you can have $74,000 per year for the next two years, along with a $30,000 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 is 9 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.)
If the interest rate is 9 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
Interest Rate per year 9% Interest Rate per month 0.75% Option1 Option2 Per year 85,000.00 74,000.00 Per Month 7,083.33 6,166.67 Statement showing calculation of NPV Option 1 Option 2 Particulars Time in Months PVF@.75% Amount PV(Amount *PVF) Amount PV(Amount *PVF) Cash inflows - 1.000 - 30,000.00 30,000.00 Cash inflows 1.000 0.9926 7,083.33 7,030.60 6,166.67 6,120.76 Cash inflows 2.000 0.9852 7,083.33 6,978.27 6,166.67 6,075.20 Cash inflows 3.000 0.9778 7,083.33 6,926.32 6,166.67 6,029.97 Cash inflows 4.000 0.9706 7,083.33 6,874.76 6,166.67 5,985.08 Cash inflows 5.000 0.9633 7,083.33 6,823.58 6,166.67 5,940.53 Cash inflows 6.000 0.9562 7,083.33 6,772.79 6,166.67 5,896.31 Cash inflows 7.000 0.9490 7,083.33 6,722.37 6,166.67 5,852.41 Cash inflows 8.000 0.9420 7,083.33 6,672.33 6,166.67 5,808.85 Cash inflows 9.000 0.9350 7,083.33 6,622.66 6,166.67 5,765.61 Cash inflows 10.000 0.9280 7,083.33 6,573.36 6,166.67 5,722.69 Cash inflows 11.000 0.9211 7,083.33 6,524.42 6,166.67 5,680.09 Cash inflows 12.000 0.9142 7,083.33 6,475.85 6,166.67 5,637.80 Cash inflows 13.000 0.9074 7,083.33 6,427.65 6,166.67 5,595.83 Cash inflows 14.000 0.9007 7,083.33 6,379.80 6,166.67 5,554.18 Cash inflows 15.000 0.8940 7,083.33 6,332.31 6,166.67 5,512.83 Cash inflows 16.000 0.8873 7,083.33 6,285.17 6,166.67 5,471.79 Cash inflows 17.000 0.8807 7,083.33 6,238.38 6,166.67 5,431.06 Cash inflows 18.000 0.8742 7,083.33 6,191.94 6,166.67 5,390.63 Cash inflows 19.000 0.8676 7,083.33 6,145.85 6,166.67 5,350.50 Cash inflows 20.000 0.8612 7,083.33 6,100.09 6,166.67 5,310.67 Cash inflows 21.000 0.8548 7,083.33 6,054.68 6,166.67 5,271.14 Cash inflows 22.000 0.8484 7,083.33 6,009.61 6,166.67 5,231.90 Cash inflows 23.000 0.8421 7,083.33 5,964.88 6,166.67 5,192.95 Cash inflows 24.000 0.8358 7,083.33 5,920.47 6,166.67 5,154.29 PV of Cash inflows 155,048.12 164,983.07
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.