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Calculating Felix's Salary and Inflation Impact

Felix Jones expects a starting salary of $65,000 from his new employer. Given average past salary increases of 5% and estimated inflation of 4% over the next 3 years, the summary calculates Felix's earnings each year in year-1 dollars and the inflation rate in his salary. In year 1 his earnings are $65,000, in year 2 $65,625, and the average inflation rate is 0.96%.

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139 views2 pages

Calculating Felix's Salary and Inflation Impact

Felix Jones expects a starting salary of $65,000 from his new employer. Given average past salary increases of 5% and estimated inflation of 4% over the next 3 years, the summary calculates Felix's earnings each year in year-1 dollars and the inflation rate in his salary. In year 1 his earnings are $65,000, in year 2 $65,625, and the average inflation rate is 0.96%.

Uploaded by

Zoloft Zithromax Prozac
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

Felix Jones, a recent engineering graduate, expects a starting salary of $ 65,000 per year.

His future employer has averaged 5%


estimated to be 4% per year for the next 3 years, how much, in year-1 dollars, will Felix be earnings each year? What is the infl

Solution:-

Computation of the dollar value (in year 1) of earning flexi will be earning each year:-

Year 1 2

Expected Salary from future employer $ 65,000.00 $ 68,250.00


Present value factor @4% i.e. rate of inflation 1 0.9615384615385

Dollar value (in year 1) of earning flexi will be earning each year $ 65,000.00 $ 65,625.00

Computation of inflation rate in flexi's salary

Year 1 2

Dollar value (in year 1) of earning flexi will be earning each year $ 65,000.00 $ 65,625.00
Average rate of inflation 0.96%

Average rate of inflation 0.96%


mployer has averaged 5% per year in salary increases for the last several years. If inflation is
each year? What is the inflation rate in Felix's salary?

$ 71,662.50
0.9245562130178

$ 66,256.01

$ 66,256.01
0.96%

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