You have received two job offers. Firm A offers to pay you $88,000 per
year for two years. Firm B offers to pay you $90,000 for two years. Two
jobs are identical except that firm B has a 50% chance of going bankrupt
at the end of the first year. If frim B goes bankrupt at the end of the
first year, you expect you could find a new job paying $85,000 per
year, but you would be unemployed for 3 months while you search for it.
(Please provide your answers as integers, or, in the format of 123456).
year for two years. Firm B offers to pay you $90,000 for two years. Two
jobs are identical except that firm B has a 50% chance of going bankrupt
at the end of the first year. If frim B goes bankrupt at the end of the
first year, you expect you could find a new job paying $85,000 per
year, but you would be unemployed for 3 months while you search for it.
(Please provide your answers as integers, or, in the format of 123456).
a. If firm B goes bankrupt at the end of the first year, your expected
income in the second year is $
income in the second year is $
b. Given your answer to part (a), and
assuming your cost of capital is 5%, the present value of offer B is $
assuming your cost of capital is 5%, the present value of offer B is $
c. The present value of offer A is $
