Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Your father is 4 years away from retirement. He earns $80,000 per year. For simplicity you may assume that your father is paid at the
Your father is 4 years away from retirement. He earns $80,000 per year. For simplicity you may assume that your father is paid at the end of the year. His wages are increasing by 2% per year. Therefore, he will receive 3 salary increases. Your older sister just graduated from university. She is starting her career working for a major financial institution. She will be paid a salary of $65,000 per year to start. You may assume that your sister will be paid at the end of year 1 . She expects her salary and other compensation to increase by 8% per year for the first fifteen years after she graduates. Therefore, she will receive 15 salary increases of 8%. After year sixteen, she expects her total compensation to increase by 3% per year thereafter. She plans on working a total of 35 years, therefore she will receive 19 salary increases of 3% per year. The appropriate discount rate is 4%. Part A: What is the value of your father's human capital? Part B: What is the value of your sister's human capital
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started