Instructions: Please make sure that you show all your work when solving the problems. Feel free to make any assumptions whenever you feel necessary. Just make sure that you clearly state your assumptions.
You have two job offers with the following 6-year compensation terms: the first one offers you $80,000 a year for 6 years; the other one offers you a signing bonus of $15,000 plus $50,000 a year for the first 4 years and then 60,000 a year for the last two years. Assume that the appropriate discount rate is 12% and there are no taxes.
a. How much would you lose in present value if you accepted the second offer?
b. By how much should the second company increase your payment amount every year, including the signing bonus, to make you indifferent between the two offers financially?