Consider a household consisting of four friends. The friends have made a commitment to live together for the next five years. Presently they live in Omaha where Alex will earn $200,000, Bobby will earn $120,000, Cory will earn $315,000, and Dana will earn $150,000 over the next five years. They have the option of moving to Miami. Moving to Miami would impose a one-time moving cost of $5,000 on each person. If they move to Miami, however, Alex will earn $180,000, Bobby will earn $150,000, Cory will earn $300,000, and Dana will earn $100,000 over the next five years. Moreover, each friend prefers to live in Miami over Omaha. In particular, Alex and Bobby both value the quality of life in Miami versus Omaha over the next five years at $40,000 while Cory and Dana place the value at $25,000 each. What is the difference in the present value of staying in Omaha and the present value of moving to Miami for the household over the next five years? Whom out of the four is a tied-mover and whom out of the four is a tied-stayer?

Answer rating: 100% (QA)

Omaha Miami Earnings Value of Quality Life Expense to Move to Miami Net Value ... View the full answer