Your company has asked if you want to transfer from your current large city location to a location at a smaller city. The current cost of living index is 132 and 95 at the proposed location. However your current salary of $70,000 will be reduced by 11% for the new location.
a. What is the adjusted salary for the new location based on the Index Method?
b. What is the additional income/loss when compared to the salary offered?
c. Over a five year period, what is the Fw of b, if you expect a rate of return of 10%/yr.
d. If the inflation rate averaged 2%/year higher in the new location, what is the value of c in today's purchasing power?