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A former employee of Chrysler-Benz is vested in the company’s pension plan. The pension benefit would pay him $220/month for the remainder of his life starting next month. The company is offering a $55,000 buyout option, which means the employee would receive $55,000 today and forego the $215/month pension payments for life. In evaluating the buyout option, the employee (age 55) assumes he will live to age 85; and that the market rate of the return is 3.5%. Justify whether or not he should take the buyout in lieu of the monthly pension payments?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92716067

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