Effective Annual Rate (LO4) You have been charged with putting together a redund

Question

Effective Annual Rate (LO4) You have been charged with putting together a redundancy package for a departing executive. The executive has asked for the following: 1. The present value of the next two years' lost pay. The executive's current annual salary is 120,000 and historical salary growth is 5 per cent annum. 2. 100,000 for reputation management and a non-disclosure contract. 3. 20,000 non-competition agreement. If the effective annual interest rate is 6 per cent, what is the size of the settlement? if you were the departing employee, would you like to see a higher or lower interest rate?

Explanation / Answer

Size of settlement=120000*1.05/1.06+120000*1.05^2/1.06^2+100000+20000=356614.4535

if you were the departing employee, you would like to see a lower interest rate

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.