Problem:
Tom Adams has received a job offer from a large investment bank as a clerk to an associate banker. His base salary will be $65,000. He will receive his first annual salary payment one year from the day he begins to work. In addition, he will get an immediate $15,000 bonus for joining the company. His salary will grow at 4.5 percent each year. Each year he will receive a bonus equal to 10 percent of his salary. Mr. Adams is expected to work for 20 years.
Required:
Question: What is the present value of the offer if the discount rate is 10 percent?
Note: Please show how to work it out.