Present Value of Different Salary Scenarios?
TLDR: How do I compare different compensation structures? Specifically with a mathematical formula.
I work at a small real estate developer (7 people) and my boss has asked me to find out what market salary and bonus structure was for a 2nd year analyst. I don't think he'll be expecting the number I've come up with from my research (way higher than he thinks) and I know he'd rather pay a less than market salary with a bonus that is based on some sort of incentive. However, the only bonus structure I know of that is somewhat incentive based is carried interest. So far these are the scenarios I plan to present to him. *Numbers are just an example*
1. Market Salary & Bonus: $90K + 18% bonus + no carry
2. Less than Market Salary & Bonus: $83K + 9% bonus + 2.5% carry
3. Less than Market Salary & Bonus: $83K + no bonus + 6% carry
Does anyone know how I can compare the above scenarios to each other? Present value? I've forecasted each of those scenarios over 5 years, including the carry amounts based on the projected net cash flows of 4 deals (assuming exits in years 3 thru 5). The issue with the carry is if my boss chooses the 3rd scenario and I leave at the end of year 3, I still would have made +/-$5000 less than the 1st scenario; and obviously, there should be some sort of "reward" for only getting paid salary for 2 years. At the end of the day the actual figures don't matter as much as the ability to compare all of the scenarios to each other to see if $X in 3 years is worth more than getting paid $X today. Any advice on comparing the scenarios or which scenario is objectively better for my situation would be greatly appreciated.
Considerations:
- My company likes to sell each building we develop within 3 years
- I only plan to work here for another 3-4 years
- I've only worked on one development that has completed construction since working here, and we will begin construction on 3 more by the end of the year
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