Upon graduation, if you begin working for ReeCorp Inc. (a private equity firm), you can earn $45,000 in year one, and expect annual increases of 10% each year. Assume the inflation rate is 2%. You also believe that you can get a promotion at the start of year 4 and year 7, which would add $10,000 to your salary each time. This is the job opportunity your parents are suggesting you pursue, instead of starting the Food Truck business. Giving up this job offer is the equivalent of an opportunity cost.

Determine the present value of a 10-year career at ReeCorp. Assume a 40% average personal tax rate. (4 marks) Steps you should consider: Starting salary in year 1 Annual increases in salary Inflation rate Impact of promotions on salary The Present Value of all those cash flows