Tom Adams has received a job offer from a large investment bank as a clerk to an associate banker. His base salary will be $49,000.
He will receive his first annual salary payment one year from the day he begins to work. In addition, he will get an immediate $20,000 bonus for joining the company. His salary will grow at 4.3 percent each year. Each year he will receive a bonus equal to 10 percent of his salary.
Mr. Adams is expected to work for 30 years. What is the present value of the offer if the discount rate is 8 percent?