Your father is 8 years away from retirement. He earns $105,000 per year. His wages are increasing
Question:
Your father is 8 years away from retirement. He earns $105,000 per year. His wages are increasing by 3% per year. You may assume that your father is paid at the end of each year.
Your older sister just graduated from university. She is starting her career working for a major financial institution. She will be paid a salary of $75,000 per year to start. You may assume that your sister will be paid at the end of year 1. She expects her salary and other compensation to increase by 14% per year for the first twelve (12) years after she graduates. After year thirteen, she expects her total compensation to increase by 4% per year thereafter. She plans on working for another 35 years.
The appropriate discount rate is 4.5%.
Part A: What is the value of your father's human capital?
Part B: What is the value of your sister's human capital?
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill