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You have two job offers, starting November 1st, 2020. At Company A you will have an initial annual salary of $75,000 and a raise of 7% on November 1st of each year thereafter. Here, the 7% raise is computed based on the salary on the date the raise is given. So, on November 1st, 2021 your salary would be $80,250, and then on November 1st, 2022 it would be $85,867.50, and so on. At Corporation B you will have an initial salary of $90,000 and a raise of 2% on November 1st of each year thereafter.

Required:
On November 1st of what year would the salary at Company A be greater than the salary at Corporation B?

Respuesta :

jepessoa

Answer:

On November 1, 2024, the salary offered by Company A would be higher than the salary offered by Company B ($98,309.70 > $97,418.89).

Explanation:

                           Company A                       Company B

Date                    Salary                                 Salary

Nov. 1, 2020       $75,000                            $90,000

Nov. 1, 2021        $80,250                            $91,800

Nov. 1, 2022       $85,867.50                       $93,636

Nov. 1, 2023       $91,878.23                        $95,508.72

Nov. 1, 2024       $98,309.70                       $97,418.89

We can use the future value formula to determine the salaries for any given year:

FV = PV x (1 + r)ⁿ

PV = $75,000

r = 7%

or

PV = $90,000

r = 2%

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