Gail Trevino expects to receive a $500,000 cash benefit when she retires five ye
ID: 2517832 • Letter: G
Question
Gail Trevino expects to receive a $500,000 cash benefit when she retires five years from today Ms Trevino's employer has offered an early retirement incentive by agreeing to pay her $325,000 today if she agrees to retire immediately Ms. Trevino desires to earn a rate of return of 8 percent (PV.ot St and PVA.ot 5) (Use appropriate factor(o) from the tables provided.) Required a Calculate the present value of the $500,000 future cash benefit. Assuming that the retirement benefit is the only consideration in making the retirement decision, should Ms Trevino accept her employer's offer? (Round your final answer to the nearest whole dollar value) Prasent value Should Ms Trevino accept the offer? Yes 1 of 14 Next> e to searchExplanation / Answer
Present value of future retirement benefit = Future value/(1+r)^n Future value = 500000 r = 8% n = 5
Present value of retirement benefit = 500000/(1.08)^5 = 340291.6
value of offer = 325000
He should not accept the offer of Employer as it results in less present value in comparison of present value of future retirement benefits
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