You are considering two work contracts, each of which lasts for five years. The two contracts are
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Question:
You are considering two work contracts, each of which lasts for five years. The two contracts are summarized in the following table.
| Year | Contract 1 | Contract 2 |
| 1 | $25000 | $55000 |
| 2 | $35000 | $65000 |
| 3 | $45000 | $25000 |
| 4 | $55000 | $35000 |
| 5 | $65000 | $45000 |
Assume that you will be paid at the end of each year. Contract 1 includes a signing bonus of $5,000 to be paid at the beginning of year 1, whereas contract 2 does not include a signing bonus. If the interest rate is 5 percent, which is the better offer?
Expert Answer:
To determine which contract is the better offer we need to calculate the present value of each contr... View the full answer
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