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Solution:-: Year 1 2

Felix Jones expects a starting salary of $65,000 from his new employer. Given average past salary increases of 5% and estimated inflation of 4% over the next 3 years, the summary calculates Felix's earnings each year in year-1 dollars and the inflation rate in his salary. In year 1 his earnings are $65,000, in year 2 $65,625, and the average inflation rate is 0.96%.

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85 views2 pages

Solution:-: Year 1 2

Felix Jones expects a starting salary of $65,000 from his new employer. Given average past salary increases of 5% and estimated inflation of 4% over the next 3 years, the summary calculates Felix's earnings each year in year-1 dollars and the inflation rate in his salary. In year 1 his earnings are $65,000, in year 2 $65,625, and the average inflation rate is 0.96%.

Uploaded by

Zoloft Zithromax Prozac
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Felix Jones, a recent engineering graduate, expects a starting salary of $ 65,000 per year.

His future employer has averaged 5%


estimated to be 4% per year for the next 3 years, how much, in year-1 dollars, will Felix be earnings each year? What is the infl

Solution:-

Computation of the dollar value (in year 1) of earning flexi will be earning each year:-

Year 1 2

Expected Salary from future employer $ 65,000.00 $ 68,250.00


Present value factor @4% i.e. rate of inflation 1 0.9615384615385

Dollar value (in year 1) of earning flexi will be earning each year $ 65,000.00 $ 65,625.00

Computation of inflation rate in flexi's salary

Year 1 2

Dollar value (in year 1) of earning flexi will be earning each year $ 65,000.00 $ 65,625.00
Average rate of inflation 0.96%

Average rate of inflation 0.96%


mployer has averaged 5% per year in salary increases for the last several years. If inflation is
each year? What is the inflation rate in Felix's salary?

$ 71,662.50
0.9245562130178

$ 66,256.01

$ 66,256.01
0.96%

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