Fresh Out of College, You Are Negotiating with Your Prospective

question 229

Multiple Choice

Fresh out of college, you are negotiating with your prospective new employer. They offer you a signing bonus of $2,000,000 today or a lump sum payment of $2,500,000 three years from now. If you can earn 7% on your invested funds, which of the following is true?

• A) Take the signing bonus because it has the lower present value.
• B) Take the signing bonus because it has the higher future value.
• C) Take the lump sum because it has the higher present value.
• D) Take the lump sum because it has the lower future value.
• E) Based on these numbers, you are indifferent between the two.

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