Question

You receive two job offers in the same big city. The first job is close to your parents’ house, and they have offered to let you live at home for a year so you will not have to incur expenses for housing, food, or cable TV. This job pays $49,000 per year. The second job is far away from your parents’ house, so you will have to rent an apartment with parking (9,000 per year), buy your own food ($3,500 per year), and pay for your own cable TV ($550 per year). This job pays $54,000 per year. You still plan to do laundry at your parents’ house once a week if you live in the city and plan to go into the city once a week to visit with friends if you live at home. Thus, the cost of operating your car will be about the same either way. Additionally, your parents refuse to pay for your cell phone service ($690 per year), and you cannot function without it.
Requirements
a. Based on this information alone, what is the net difference between the two alternatives (salary, net of relevant costs)?
b. What information is irrelevant? Why?
c. What qualitative information is relevant to your decision?
d. Assume you really want to take Job #2, but you also want to live at home to cut costs.
What new quantitative and qualitative information will you need to incorporate in your decision?


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  • CreatedApril 30, 2015
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