Ford Motor Company is considering an early retirement buyout package for some employees. The package involves paying out today's fair value of the employee's final year of salary. Shelby is due to retire in one year. Her salary is at the company maximum of $72,000. If prevailing interest rates are 6.75% compounded monthly, what buyout amount should Ford offer to Shelby today
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- Using the information provided, what transaction represents the best application of the present value of an annuity due of $1? A. Falcon Products leases an office building for 8 years with annual lease payments of $100,000 to be made at the beginning of each year. B. Compass, Inc., signs a note of $32,000, which requires the company to pay back the principal plus interest in four years. C. Bahwat Company plans to deposit a lump sum of $100.000 for the construction of a solar farm In 4 years. D. NYC Industries leases a car for 4 yearly annual lease payments of $12,000, where payments are made at the end of each year.To insure you, Assurances Nochance Ltd offers the following plan: you will pay 20 annual payments of $8,000 starting one year from today. Then, in year 21, you or your heirs will receive a pension for the following 15 years. The discount rate used by the company to calculate your pension is 6%. (a) What is the size of your annual pension? (b) Ifyoucouldtakeaone‐timelumpsumpayment25yearsfromtodayinsteadofthepension,how high would the equivalent lump sum payment have to be?.When your firm hires a new employee this year, it is obligated to contribute GBP £5,000 to a defined contribution plan for that employee, one year after the hire date. The contribution must be adjusted annually for inflation. Assume that inflation will be a constant 2.0% a year from this point forward. What is the pension cost to you of hiring a 30 year old who will be with the company for 32 years if the appropriate discount rate is 10%? Round your answer to the nearest pound.
- Many companies offer retirement plans wherein the company matches the contributions made by the employee up to 6% of the employee’s salary. An engineer planning for her retirement expects to invest the maximum of 6% each year. Her salary in year one is $60,000 and is expected to increase by 4% each year. Including the employer’s contributions, how much will she have in her account at the end of 20 years if interest accrues at 7% per year?Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.4% × service years × final year's salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2010 and is expected to retire at the end of 2044 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $92,000 at the end of 2024 and the company's actuary projects her salary to be $290,000 at retirement. The actuary's discount rate is 6%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: Estimate by the accumulated benefits approach the amount of Davenport's annual retirement payments earned as of the end of 2024. What is the company's accumulated benefit obligation at the end of 2024 with respect to Davenport? Note: Do not round intermediate calculations. Round your final answer to the nearest whole dollar. If no estimates are changed…Sachs Brands’s defined benefit pension plan specifies annual retirement benefits equal to 1.6% × service years × final year’s salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2010 and is expected to retire at the end of 2044 after 35 years’ service. Her retirement is expected to span 18 years. Davenport’s salary is $90,000 at the end of 2024 and the company’s actuary projects her salary to be $240,000 at retirement. The actuary’s discount rate is 7%. At the beginning of 2025, changing economic conditions caused the actuary to reassess the applicable discount rate. It was decided that 8% is the appropriate rate. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: Calculate the effect of the change in the assumed discount rate on the PBO at the beginning of 2025 with respect to Davenport. Note: Do not round intermediate calculations. Round your final answer to…
- Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.6% × service years × final year's salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2010 and is expected to retire at the end of 2044 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $90,000 at the end of 2024 and the company's actuary projects her salary to be $240,000 at retirement. The actuary's discount rate is 7%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1.What is the company’s projected benefit obligation at the beginning of 2024 (after 14 years’ service) with respect to Davenport? Note: Do not round intermediate calculations. Round your final answer to the nearest whole dollar. 2.Estimate by the projected benefits approach the portion of Davenport’s annual retirement payments attributable to 2024…Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.5% × service years × final year's salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2010 and is expected to retire at the end of 2044 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $88,000 at the end of 2024 and the company's actuary projects her salary to be $270,000 at retirement. The actuary's discount rate is 6%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) At the beginning of 2025, the pension formula was amended to: 1.65% × Service years × Final year's salary The amendment was made retroactive to apply the increased benefits to prior service years. Required: What is the company's prior service cost at the beginning of 2025 with respect to Davenport after the amendment described above? Since the amendment occurred at the…Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.5% × service years × final year's salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2010 and is expected to retire at the end of 2044 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $88,000 at the end of 2024 and the company's actuary projects her salary to be $270,000 at retirement. The actuary's discount rate is 6%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) At the beginning of 2025, the pension formula was amended to: 1.65% × Service years × Final year's salary The amendment was made retroactive to apply the increased benefits to prior service years. Required: What is the company's prior service cost at the beginning of 2025 with respect to Davenport after the amendment described above? Since the amendment occurred at the…
- Sachs Brands’ defined benefit pension plan specifies annual retirement benefits equal to: 1.6% * serviceyears * final year’s salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginningof 2002 and is expected to retire at the end of 2036 after 35 years’ service. Her retirement is expected tospan 18 years. Davenport’s salary is $90,000 at the end of 2016 and the company’s actuary projects her salary tobe $240,000 at retirement. The actuary’s discount rate is 7%.Required:1. Draw a time line that depicts Davenport’s expected service period, retirement period, and a 2016 measurementdate for the pension obligation.2. Estimate by the accumulated benefits approach the amount of Davenport’s annual retirement payments earnedas of the end of 2016.3. What is the company’s accumulated benefit obligation at the end of 2016 with respect to Davenport?4. If no estimates are changed in the meantime, what will be the accumulated benefit obligation at the end of2019…Tommy is retiring from his job soon at which time his employer willmake the following offer:1. A lumpsum amount of $200,0002. A sum of $15,000 at the beginning of each year for the next 25years.If the average interest rate is likely to be 5.5% p.a. for the next25 years, which option should Timothy choose?Mrs. Bautista is a chief financial officer of TCB Catering Services. He proposed to thecompany that they offer a retirement plan for a company employee who is now 55years of age. The plan will provide an annuity due of Php7,000 every year for 15 years upon retirement at the age of 65.The companyil isfl funding the plan with an annuity due of 10years.If the rate of interest per year is 5%,what is the amount of installment that the company should pay to fundtl this retirement?