Garland Inc. offers a new employee a single-sum signing bonus at the date of employment, June...
Garland Inc. offers a new employee a single-sum signing bonus at the date of employment, June 1, 2021. Alternatively, the employee can receive $46,000 at the date of employment plus $17,000 each June 1 for five years, beginning in 2025. Assuming the employee's time value of money is 9% annually, what single amount at the employment date would make the options equally desirable? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
-
$49,172
-
$91,672
-
$54,560
-
$97,060
Homework Answers
Present value of annuity at 9% for first 3 years 2.5313
Present value of annuity at 9% for 8 years 5.5348
Present value of $17,000 should be calculated from 4th year to 8th year.
Single amount that is desirable:
= $46,000 + [$17,000 (5.5348 - 2.5313)]
= $97,060
4th option
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Garland Inc. offers a new employee a single-sum signing bonus at
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