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Congratulations! you have just been hired as a junior analyst with the business consulting firm “We...

Congratulations! you have just been hired as a junior analyst with the business consulting firm “We Crunch the Numbers”. During your first day as you complete all the paperwork involved with a new employee you are asked your preference with respect to payroll. Crunch the Numbers allows its employees to choose to be paid monthly or semi-monthly. What is your decision? You must use concept(s) from this class in your response.

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Answer #1

You must prefer the semimsemi salary option if the salaries are same across the two alternatives. This is based on the simple concept of time value of money which is based on the simple assumption that money received today is better than being received tomorrow and is due to simple assumption of opportunity cost. The salary received bi monthly can be invested at some interest and therefore its present value is more than the monthly options.

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