A Union Contract Guarantees A $15 \%$ Salary Increase Yearly for 3 Years

question 3

Multiple Choice

A union contract guarantees a $15 \%$ salary increase yearly for 3 years. For a current salary of $\$ 31,000$ , the salary $f ( t )$ (in thousands of dollars) for the next 3 years is given by
$$f ( t ) = \left\{ \begin{array} { l l } 31.00 , & 0 < t \leq 1 \\35.65 , & 1 < t \leq 2 \\41.00 , & 2 < t \leq 3\end{array} \right.$$
where $t$ represents the time in years. Find the limit of $f$ as $t \rightarrow 1.00$ , if it exists.

• A) \(31.00\)
• B) \(35.65\)
• C) \(1.00\)
• D) \(41.00\)
• E) The limit does not exist.

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Definitions:

After-Tax Cost

The net cost of a transaction or investment after the effects of taxes are considered, often used in analyzing the cost of financing options.

Specific Capital

This refers to the various types of capital (debt, equity, etc.) a company uses for financing its operations and investments, with each type having its own cost and characteristics.

Component Costs

The individual costs associated with the different sources of capital a firm utilizes in its capital structure.

Embedded Costs

Embedded costs refer to the expenses that a company has already incurred and cannot be recovered.