Julie has just retired. Her company’s retirement program has two options as to h
ID: 2527201 • Letter: J
Question
Julie has just retired. Her company’s retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $140,000 immediately as her full retirement benefit. Under the second option, she would receive $27,000 each year for five years plus a lump-sum payment of $59,000 at the end of the five-year period.
Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.
Calculate the present value for the following assuming that the money can be invested at 12%. (Use the appropriate table to determine the discount factor(s).)
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Julie has just retired. Her company’s retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $140,000 immediately as her full retirement benefit. Under the second option, she would receive $27,000 each year for five years plus a lump-sum payment of $59,000 at the end of the five-year period.
Explanation / Answer
1a Present value: Option 1 140000 Option 2 130788 =(27000*3.605)+(59000*0.567) b First option
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