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Which offer has a greater present value

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Joey receives two job offers: Job A has a starting annual salary of $90,000 and an expected annual salary growth of 7%. Job B has a starting annual salary of $110,000 and an expected salary growth of 5%. Joey is 30 years old and plans to retire when he turns 65. Ignore bonuses, pensions, other compensations and taxes; all cash flows will be made at the end of each year. Joey discounts future cash flows at an effective annual rate of 10%.

  • a. Which  offer has a greater present value?
  • b. If  Joey plans to retire when he turns 55 years old, which offer has a greater  present value?    
  • c. If  we consider income taxes, could your answers to (a) and (b) be different? Why? 

Reference no: EM131402145

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