Tom Adams has received a job offer from a large investment bank as a clerk to an

Question

Tom Adams has received a job offer from a large investment bank as a clerk to an associate banker. His base salary will be $65,000. He will receive his first annual salary payment one year from the day he begins to work. In addition, he will get an immediate $15,000 bonus for joining the company. His salary will grow at 4.5 percent each year. Each year he will receive a bonus equal to 10 percent of his salary. Mr. Adams is expected to work for 20 years.

What is the present value of the offer if the discount rate is 10 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Tom Adams has received a job offer from a large investment bank as a clerk to an associate banker. His base salary will be $65,000. He will receive his first annual salary payment one year from the day he begins to work. In addition, he will get an immediate $15,000 bonus for joining the company. His salary will grow at 4.5 percent each year. Each year he will receive a bonus equal to 10 percent of his salary. Mr. Adams is expected to work for 20 years.

Explanation / Answer

What is the present value of the offer if the discount rate is 10 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

=15000+650000*1.1/1.1+650000*1.1^2/1.1^2....

=15000+65000*20

=1315000

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