Wages and salaries of the employees is Rs.300,000 each year. Discount rate and efficiency ratio are 12% and 1.3 respectively. Required: Present Value of human resource for five years. Group "B"…

Solution:

The Present Value (PV) of human resources is calculated using the efficiency-adjusted salary and discount rate. The formula for PV is:

$$PV=\sum _{t=1}^n\frac{{\text{Salary}}_t\times \text{Efficiency Ratio}}{(1+\text{Discount Rate}{)}^t}$$

Given:

• Annual salary (${\text{Salary}}_t$) = Rs. 300,000
• Efficiency ratio = 1.3
• Discount rate = 12% (0.12)
• Time period ($n$) = 5 years

Step-by-Step Calculation:

1. Efficiency-adjusted salary = Rs. 300,000 × 1.3 = Rs. 390,000

2. Present Value for each year (using $P{V}_t=\frac{390,000}{(1.12{)}^t}$):

   • Year 1: $\frac{390,000}{1.12}=348,214.29$
   • Year 2: $\frac{390,000}{(1.12{)}^2}=310,895.77$
   • Year 3: $\frac{390,000}{(1.12{)}^3}=277,505.06$
   • Year 4: $\frac{390,000}{(1.12{)}^4}=247,772.37$
   • Year 5: $\frac{390,000}{(1.12{)}^5}=220,323.54$

3. Total Present Value = Sum of all yearly PVs: $$348,214.29+310,895.77+277,505.06+247,772.37+220,323.54=\text{Rs. 1,404,711.03}$$

Final Answer: Rs. 1,404,711.03 (rounded to two decimal places).