When Professor Kai Chen graduated from University of Wisconsin-Milwaukee, he had two job offers which were both 5-year contracts. Contract 1 is from Minnesota, $11,000 per year being paid at the end of each year. Contract 2 is from North Carolina, starting with $6,200 for first year and increasing by $2,500 each year, also paid at the end of each year. The interest rate on the market that Professor Kai Chen could earn at that time was 6% per year
What is the present value of contract 1
What is the present value of contract 2
According to the theory of time value of money, which offer should Professor Kai Chen take?
What is the present value of Contract 1 if it will pay the salary at the beginning of each year?
What is the present value of Contract 1 if it will pay the salary at the beginning of each year?