Solution:
Computation of Present value of Future Salary Cash flow | |||
Year | Salary | PV factor (10%) | Present Value |
1 | $40,000.00 | 0.909091 | $36,363.64 |
2 | $41,200.00 | 0.826446 | $34,049.59 |
3 | $42,436.00 | 0.751315 | $31,882.79 |
4 | $43,709.08 | 0.683013 | $29,853.89 |
5 | $45,020.35 | 0.620921 | $27,954.10 |
6 | $46,370.96 | 0.564474 | $26,175.20 |
7 | $47,762.09 | 0.513158 | $24,509.51 |
8 | $49,194.95 | 0.466507 | $22,949.81 |
9 | $50,670.80 | 0.424098 | $21,489.37 |
10 | $52,190.93 | 0.385543 | $20,121.86 |
11 | $53,756.66 | 0.350494 | $18,841.38 |
12 | $55,369.35 | 0.318631 | $17,642.38 |
13 | $57,030.44 | 0.289664 | $16,519.69 |
14 | $58,741.35 | 0.263331 | $15,468.43 |
15 | $60,503.59 | 0.239392 | $14,484.08 |
16 | $62,318.70 | 0.217629 | $13,562.36 |
17 | $64,188.26 | 0.197845 | $12,699.30 |
18 | $66,113.91 | 0.179859 | $11,891.17 |
19 | $68,097.32 | 0.163508 | $11,134.46 |
20 | $70,140.24 | 0.148644 | $10,425.90 |
21 | $72,244.45 | 0.135131 | $9,762.43 |
22 | $74,411.78 | 0.122846 | $9,141.19 |
23 | $76,644.14 | 0.111678 | $8,559.48 |
24 | $78,943.46 | 0.101526 | $8,014.78 |
25 | $81,311.76 | 0.092296 | $7,504.75 |
26 | $83,751.12 | 0.083905 | $7,027.18 |
27 | $86,263.65 | 0.076278 | $6,579.99 |
28 | $88,851.56 | 0.069343 | $6,161.26 |
Total | $480,769.96 |
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