You are scheduled to graduate from the Carson College of Business in May. You have received two job offers as follows: A position at a large accounting firm with a salary offer of $70,000/year. The firm typically provides annual pay raises in the amount of 4% per year. You will likely be promoted every other year and receive a $10,000 raise at the time of each promotion.

A position at a bank with a salary of $78,000/year. The firm typically provides annual pay raises in the amount of 4% per year. You will not be eligible for promotion until your 5th year and will have to change employers after that to obtain further promotions. The benefits, hours, working conditions, and other factors relating to the two positions are otherwise indistinguishable.

a. Using a ten-year time horizon and a 5% discount rate, what is the present value of each position?

b. Considering only the monetary factors, which position should you accept, why?

c. In todays money, how much better is the more favorable of the two positions in dollars?