Question

Assume that you work for a government agency in İstanbul with a salary of $9700 per year. You are now being transferred to a branch office in Tokat and your salary will be reduced 12% with this transfer. Although your salary is reduced you accept this transfer. You know that the cost of living index in İstanbul is 291 where it is 223 in Tokat. Over the next 7 years, what is the FW (future value) of your extra income/improved life style (through the reduced cost of living) from having made this move? Your MARR is 12% per year.

Answer 1

Salary in Istanbul = $9,700

Salary in Tokat = $9,700 * 0.91 = 8,536

Cost of living Index in Istanbul = 291

Cost of living Index in Tokat = 223

Per year expenditure in Tokat = 8,536 * (223 / 291) = 6,541.33

Per year saving in Tokat = 8,536 - 6,541.33 = 1,994.66

MARR = 12% per year

Future worth is calculated as: [Amount Saved * (1 + MARR)^^{Money saved for years}]

Money saved in year	Amount Saved	Money saved can earn interest for years	Future Worth
1	1,994.66	6	3,937.11
2	1,994.66	5	3,515.27
3	1,994.66	4	3,138.64
4	1,994.66	3	2,802.35
5	1,994.66	2	2,502.10
6	1,994.66	1	2,234.02
7	1,994.66	0	1,994.66
			20,124.15

Future worth of money saved after 7 years = 20,124.15