Use the Following Information to Answer the Question(s) Below

question 31

Multiple Choice

Use the following information to answer the question(s) below.
Suppose that you have received two job offers. Rearden Metal offers you a contract for $75,000 per year for the next two years while Wyatt Oil offers you a contract for $90,000 per year for the next two years. Both jobs are equivalent. Suppose that Rearden Metal's contract is certain, but Wyatt Oil has a 60% chance of going bankrupt at the end of the year. In the event that Wyatt Oil files for bankruptcy, it will cancel your contract and pay you the lowest amount possible for you to not quit. If you do quit, you expect you could find an new job paying $75,000 per year, but you would be unemployed for four months while searching for this new job.
-Assuming your cost of capital is 6 percent,the present value of your expected wage if you accept Rearden Metal's offer is closest to:

• A) $138,000
• B) $140,000
• C) $144,000
• D) $150,000

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Definitions:

Demand Curve

A graphical representation that demonstrates the relationship between the price of a good and the quantity demanded by consumers at various price levels.

Education

The process of facilitating learning, acquiring knowledge, skills, values, beliefs, and habits through various means such as teaching, training, storytelling, and research.

Corrective Tax

A tax designed to incentivize economic activities that are more socially desirable or to correct market imperfections.

Demand Curve

A graphical representation of the relationship between the price of a good and the quantity of that good that consumers are willing to purchase, usually sloping downward.