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Payments commencing in one year and five payments

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A new finance graduate has just commenced employment. The graduate plans to take the job for five years before seeking another position, and has been offered a choice of the following salary packages. The appropriate discount rate is 10%. Which is the preferred salary package in present value terms?

a Annual salary of $56,700 with payments commencing in one year and five payments in total

b A commission of 30% of sales. Yearly commissions are expected to be, Year 1 $45,000; Year 2 $52,500; Year 3 $54,000; Year 4  $ 60,000; Year 5 $63,000

c $210,000 today and no further income

d $100,000 today plus an annual salary of $25,000. The first annual payment is today. (A total of six equal salary payments).

e $25000 salary each year (five end of year payments) plus a sum of $125000 at end of year five.

Reference no: EM131597114

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