Ashley is 30 years old when graduating from the University of Utah. At the time of graduation, she is offered employment in both Utah and California. Sally will work until she is 65 years old regardless of her employment choice. Compensation is distinct for each employment option according to the following criteria:

Utah: Starting salary of $52,000. Annual wage growth of 2.5% through age 52 and then no wage growth through retirement. Discount rate of 3.5%.

California: Starting salary of $57,000. Annual wage growth of 3.0% through age 54 and then no wage growth through retirement. Discount rate of 4.5%. Costs of moving to California total $23,500 – incurred in the first period.

Which job should Ashley take in order to maximize real lifetime earnings? Show all calculations.

Answer rating: 100% (QA)

Lets start by calculating the present value of earnings for the Utah job option 1 Calculate the annu... View the full answer