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

question 96

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 a 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,based on the present value of your expected wage you should:

• A)accept Rearden's offer since the PV of your expected wage would be approximately $6000 higher.
• B)accept Rearden's offer since the PV of your expected wage would be approximately $8000 lower.
• C)accept Rearden's offer since the PV of your expected wage would be approximately $8000 higher.
• D)accept Wyatt's offer since the PV of your expected wage would be approximately $6000 higher.

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Definitions:

Net Worth

Net worth is the total assets minus total outside liabilities of an individual or a company, indicating financial health or position.

Medicaid

A government healthcare program in the United States that provides health coverage to eligible low-income adults, children, pregnant women, elderly adults, and people with disabilities.

Arithmetic Mean

The sum of a collection of numbers divided by the count of numbers in the collection, often used as a measure of central tendency.

Investment

Allocation of resources, usually financial, in assets or projects expected to yield returns over time.