8.) I need show work Using the information below calculate the present value of
ID: 2620361 • Letter: 8
Question
8.)
I need show work
Using the information below calculate the present value of the retirement benefits (projected benefits obligation) as of the current date (end of 2017).
FACTS:
The company has a defined benefit plan
Cindy's salary at the end of 2017
$ 125,000
Retirement expected after
41
years of service
Retirement period is expected to be
20
years
Interest Rate
2.0%
Benefits are calculated as a formula as the product of:
Service already provided
11
years
Percentage
2.0%
Final year's salary is projected to be
$ 292,000
8.)
I need show work
Using the information below calculate the present value of the retirement benefits (projected benefits obligation) as of the current date (end of 2017).
FACTS:
The company has a defined benefit plan
Cindy's salary at the end of 2017
$ 125,000
Retirement expected after
41
years of service
Retirement period is expected to be
20
years
Interest Rate
2.0%
Benefits are calculated as a formula as the product of:
Service already provided
11
years
Percentage
2.0%
Final year's salary is projected to be
$ 292,000
Explanation / Answer
We have to calculate Present Value of retirement benefits
Benefit = $292,000
Total Service period eligible for retirement = 41
Already provided= 11
Balance years of service to be eligible for retirement benefits= 30
Present value of Retirement benefits at the time of retirement = $ 2,92,000 X PVAF ( 20, 2%)
= $ 2,92,000 X 16.35
= $ 4,774,200
Present value of Retirement benefits Today = $ 4,774,200 X PVF ( 30, 2% )
= $ 4,774,200 X 0.55
= $ 2,625,810
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