Business, 20.03.2020 23:01 fireman59937

Suzanne is a recent chemical engineering graduate, who has been offered a five year contract at a remote location. She has been offered two choices. The first salary choice is a fixed salary of $75,000 per year. The second one has a starting salary of $65,000 with annual increases of 5% starting in year 2. For calculation purposes, assume that her salary is paid at the end of the year.

If the interest rate is 9%, calculate the present value P1 for choice 1 and present value P2 for choice 2 and determine which choice is best. The best answer is:

answer A: P2 = $277,170 and salary choice 2 is better than salary choice 1
answer B: P1 = $291,724 and salary choice 2 is better than salary choice 1
answer C: P2 = $277,070 and salary choice 1 is better than salary choice 2
answer D: P1 = $291,524 and salary choice 1 is better than salary choice 2
answer E: Either P1 or P2 or both are more than $1000 different from properly calculated values for P1 and/or P2

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