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After graduating from college, Jane has two job offers to consider. Job A is compensated at $100,000 a year but
with no hope of ever having an increase in pay. Jane knows a few of her peers are getting that kind of an offer right
out of college. Job B is for a social media start-up, which guarantees a mere $10,000 a year. The founder is sure the
concept of the company will be the next big thing in social networking and promises a pay increase of 25% at the
beginning of each new year.
a. Which job will have a greater annual salary at the beginning of the fifth year? By approximately how much?
b. Which job will have a greater annual salary at the beginning of the tenth year? By approximately how much?
c. Which job will have a greater annual salary at the beginning of the twentieth year? By approximately how
much?
d. If you were in Jane’s shoes, which job would you take?

Respuesta :

bayosanuade

Answer: (a)  Job A , by approximately $69, 482

[tex]\\[/tex] (b)  Job A , by approximately $6,867

 [tex]\\[/tex](c) Job B , by approximately $ 767,362

  [tex]\\[/tex] (d) Job A

Step-by-step explanation:

JOB B

[tex]\\[/tex]The starting Salary is $ 10,000

Since there is an increment of 25% at the beginning of each new year. The breakdown of the increment is as follow:

[tex]\\[/tex]First year : 125% of $ 10,000 = $12,500

[tex]\\[/tex]Second year : 125% of $ 12,500 = $15,625

[tex]\\[/tex]Third year : 125% of $15,625= $19,531.25

[tex]\\[/tex]Fourth year: 125% of $19,531.25 = $24,414.06

[tex]\\[/tex]Fifth year : 125% of $24,414.06 = $30,517.58

[tex]\\[/tex]Sixth year: 125% of $30,517.58 = $38,147.00

[tex]\\[/tex]Seventh year: 125% of $38,147.00 = $47,683.75

[tex]\\[/tex]Eight year: 125% of $47,683.75 = $59,604.69

[tex]\\[/tex]Ninth year: 125% of $59,604.69 = $74,505.86

[tex]\\[/tex]Tenth year: 125% of $74,505.86 = $93,132.32

[tex]\\[/tex]Following the same procedure:

[tex]\\[/tex]Eleventh year = $116,415.40

[tex]\\[/tex]Twelfth year = $145,519.25

[tex]\\[/tex]Thirteenth year = $181,899.06

[tex]\\[/tex]Fourteenth year = $227,373.82

[tex]\\[/tex]Fifteenth year = $ 284,217.29

[tex]\\[/tex]Sixteenth year = $355,271.61

[tex]\\[/tex]Seventeenth year = $444,089.51

[tex]\\[/tex]Eighteenth year = $555,111.89

[tex]\\[/tex]Nineteenth year = $693,889.86

[tex]\\[/tex]Twentieth year = $867,362.32

[tex]\\[/tex](a) Following the analysis above, at the beginning of the fifth year Job A will have a greater annual salary

[tex]\\[/tex]Difference: Salary of Job A at the beginning of fifth year remains $ 100,000 while that of Job B resulted into $ 30,517.58, the difference implies

$100,000 - $ 30,517.58 = $69,482

[tex]\\[/tex](b) At the beginning of tenth year, Job A is still $100,000, Job B resulted into $93,132.32. Job A is still greater by approximately $6,867

[tex]\\[/tex](c) At the beginning of the twentieth year, the annual salary of A is still $ 100,000 while the annual salary of B is $ 867,362.32. Job B annual salary is greater by approximately $ 767,362

[tex]\\[/tex](d) If I were in Jane’s shoe I will take Job A and work for few years to gain more experience the look for a job that pays better. Waiting for many years in case of Job B is risky , market situation is uncertainty.

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