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# minimum earnings

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Suppose that an engineer is deciding whether or not to move to northern Virginia or remain at his current job in Milwaukee. It costs \$10,000 for this person to move from Milwaukee, which includes both actual and "psychic" costs. If she plans on working 2 more periods and will make \$110,000 in each in Milwaukee, what is the minimum earnings necessary to induce her to move to northern Virginia? Assume a .10 discount rate.

https://brainmass.com/economics/labour-economics/minimum-earnings-labor-economics-77947

#### Solution Preview

Hello!
Here we must calculate the net present value (NPV) of both possibilities:

- Staying in Milwaukee:
In this case, the present value of her earnings (assuming that the 1st payment is to be collected at the end of the period) is:

NPV = 100000/(1.10) + 100000/(1.10^2) = 173553.71

So the NPV of staying in Milwaukee is ...

#### Solution Summary

The expert determines the minimum earnings in this case.

\$2.19