You are unemployed, 21 years old, and searching for a job. Until you accept a job offer,

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You are unemployed, 21 years old, and searching for a job. Until you accept a job offer, the following situation occurs. At the beginning of each year, you receive a job offer. The annual salary associated with the job offer is equally likely to be any number between $20,000 and $100,000. You must immediately choose whether to accept the job offer. If you accept an offer with salary $x, you receive $x per year while you work (assume you retire at age 70), including the current year. Assume that cash flows are discounted so that a cash flow received one year from now has a present value of 0.9. You decide to accept the first job offer that exceeds w dollars.
a. Use simulation to determine the value of w (within $10,000) that maximizes the expected NPV of earnings you will receive the rest of your working life.
b. Repeat part a, but now assume that you get a 3% raise in salary every year after the first year you accept the job.

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Business Analytics Data Analysis and Decision Making

ISBN: 978-1133629603

5th edition

Authors: S. Christian Albright, Wayne L. Winston

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