Mohamed accepted a new position as an electrician. Mohamed has a starting annual salary of $65,000 with an expected raise of 2.5% per year. If Mohamed stays at this job for 10 years, what would be his salary?
Mohamed accepted a new position as an electrician. Mohamed has a starting annual salary of $65,000 with an expected raise of 2.5% per year. If Mohamed stays at this job for 10 years, what would be his salary?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Mohamed accepted a new position as an electrician. Mohamed has a starting annual salary of $65,000 with an expected raise of 2.5% per year. If Mohamed stays at this job for 10 years, what would be his salary?
Expert Solution
Step 1 Present Value Annuity Factor
PVAF= (1-(1+r)-n)/r
r= rate per period
n= number of periods
In our question,
r= 0.025 every year
n= 9 years
PVAF= (1-(1+0.025)-9)/0.025
= 7.9708
Salary in 1st Year= $65000
Net salary after 10 years (of 10 years)= 65000+(65000*7.9708)= $(65000+ 518102)= $ 583102
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