Meera is trying to decide on which career to pursue

jagguarpaw January 24, 2017 0 Comments

Question: Meera is trying to decide on which career to pursu…

Meera is trying to decide on which career to pursue. She has trained as a chemist, but has also been given a job offer in a different field, software development. Meera has already figured that her lifetime earnings as a software developer would have a present value of $1,400,000. But yesterday, she received an offer from a chemicals firm. There would be an up-front (t0) signing bonus of $30,000. Her salary would be paid annually at the end of each year. The Year 1 salary would be $62,000; plus a bonus (paid simultaneously) initially set at 30% ($18,600). In her industry, she estimates that chemist salaries will rise by 3% annually and bonuses will rise by 4% annually as her seniority increases, no matter where she works; and she plans on working as a chemist for 25 years. The discount rate she is using to do her calculations is 6%, which is what she figures she could earn if she unexpectedly inherited a million dollars.

Which career should she pursue?