To retain high-performing engineers, a large semiconductor
company provides corporate stock as
part of the compensation package. In one particular
year, the company offered 1000 shares of either
class A or class B stock. The class A stock was selling
for $30 per share at the time, and stock market
analysts predicted that it would increase at a rate of
6% per year for the next 5 years. Class B stock was
selling for $20 per share, but its price was expected
to increase by 12% per year. At an interest rate of
8% per year, which stock should the engineers select
on the basis of a present worth analysis and a
5-year planning horizon?