When Your Firm Hires a New Employee This Year, It

question 9

Multiple Choice

When your firm hires a new employee this year, it is obligated to contribute $5,000 to a defined contribution plan for that employee, one year after the hire date. The contribution must be
Adjusted annually for inflation. Assume that inflation will be a constant 2.5% a year from this
Point forward. What is the cost to you of hiring a 30-year old who will be with the company
For 32 years if the appropriate discount rate is 10%? Round your answer to the nearest dollar.

• A)$58,653
• B)$66,667
• C)$59,708
• D)$68,333

---

Definitions:

Reservation Price

The maximum amount a consumer is willing to pay for a good or service.

Elasticity of Demand

An index that determines the sensitivity of consumer demand for a product to its price change, by comparing the percent change in the amount of the good demanded with the percent change in its price.

Business Users

Individuals or entities that use goods or services for the purpose of running a business, as opposed to personal or recreational use.

Prime Rib Dinner

A meal featuring a prime rib, which is a cut of beef from the primal rib, traditionally roasted and served as a significant dish in Western cuisine.