Question
Suppose a worker current lives in Location A and is deciding whether or not to move to Location B. We can use a three-period model
Suppose a worker current lives in Location A and is deciding whether or not to move to Location B. We can use a three-period model to represent the remaining work periods left in this worker's life cycle. If the worker stays in Location A, she will earn $18,719 for each of the three periods. If the worker moves to Location B, she will earn $23,745 for each of the three periods. What is the difference between the present value of moving to Location B and the present value of staying in Location A if the worker has a discount rate of 13%? (i.e. PV of Location B - PV of Location A)
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