I need show work. 7.) Based on the following information calculate the present v
ID: 2620360 • Letter: I
Question
I need show work.
7.)
Based on the following information calculate the present value of retirement benefits as of the retirement date.
FACTS:
The company has a defined benefit plan
Joe's salary at the end of 2017
$ 88,400
Retirement expected after
45
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
15
years
Percentage
2.0%
Final year's salary is projected to be
$ 256,000
7.)
Based on the following information calculate the present value of retirement benefits as of the retirement date.
FACTS:
The company has a defined benefit plan
Joe's salary at the end of 2017
$ 88,400
Retirement expected after
45
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
15
years
Percentage
2.0%
Final year's salary is projected to be
$ 256,000
Explanation / Answer
We have to calculate the present value of retirement benefits as of the retirement date.
At the time of retirement salary = $ 256,000
Benefit Plan = $ 256,000
Present Value at the retirement date = $ 256,000 X PVAF ( 20, 2%)
= $ 256,000 X 16.35
= $ 4,224,000
Present Value Today = $ 4,224,000 X PVF ( 30, 2% )
= $ 4,224,000 X 0.55
= $ 2,323,200