Homework Answers
Please find below the solution...
| First we have to compute the present value of current offer | ||||||||||
| Year | Cash flow(in million) | PVIF @ 11% | present value | |||||||
| 1 | 1.49 | 0.9009 | 1.3423 | |||||||
| 2 | 1.52 | 0.8116 | 1.2337 | |||||||
| 3 | 2.43 | 0.7312 | 1.7768 | |||||||
| 4 | 2.94 | 0.6587 | 1.9367 | |||||||
| 5 | 3.19 | 0.5935 | 1.8931 | |||||||
| Total | 8.1826 | |||||||||
| In order to get 1.96 million higher new offer should have present value of 8.1826+1.96= | 10.1426 | million | ||||||||
| we have to use financial calculator to solve this problem | ||||||||||
| Put in calculator below, put calculator in BEGIN mode | ||||||||||
| PV | -10.1426 | |||||||||
| FV | 0 | |||||||||
| I | 11% | |||||||||
| N | 5 | |||||||||
| Compute PMT | $2.47 | million | ||||||||
| therefore annual salary = | $2.47 | million | ||||||||
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