Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

A small business owner (Craig Osborn) has a defined-benefit retirement plan for him and three employees. At retirement, Craig will get 50% of his last-year before retirement's annual salary while each employee will get 40% of his or her last-year before retirement's annual salary. The company will fund the plan by making 15 annual contributions. The plan's compound annual interest rate is 12%. The plan will make annual payment to each participant at the beginning of each year for 20 years starting from retirement date.

She provides you the following salary and retirement information current as of January 1, 2015 (This is the date the 15 annual contributions to the plan starts).

Name Current Annual Salary Estimated Retirement Date
Craig Osborn $48,000 January 1, 2040
Dean Smith $36,000 January 1, 2045
Danny Aubrey $18,000 January 1, 2035
Pamela Langford $15,000 January 1, 2030
Each year-end, Craig and his employees will have raises of 4%.
Required
a. What is the annual retirement benefit for each plan participant? (Round to the nearest dollar.) Hint: Craig will receive raises for 24 years, Dean will receive raises for 29 years, Danny will receive raises for 19 years, and Pamela will receive raises for 14 years.
b. What amount must be contributed to the plan at the end of 15 years to ensure that all benefits will be paid? (Round to the nearest dollar.) Hint: find out the PV of annuity for each participant then total. Note that Craig will retire 10 years after contributions stop, Dean will retire 15 years after contributions stop, Danny will retire 5 years after contributions stop, and Pamela will retire the beginning of the year after contributions stop.
c. What is the required annual beginning of the year contributions? Recall that annual compounded interest rate is 12%.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M923886

Have any Question? 


Related Questions in Basic Finance

An exhaust stream leaving a semiconductor fabrication plant

An exhaust stream leaving a semiconductor fabrication plant contains 4 mol % volatile organic chemical, VOC, pollutant. Twenty-five cubic meters per minute enter the bottom of a packed absorption tower and flows counterc ...

A scarf company built a new parking garage in a business

A Scarf Company built a new parking garage in a business district. For a random sample of 100 days, daily fees collected averaged $1,800, with a standard deviation of $500. Construct a 90% confidence interval estimate of ...

Based on the corporate valuation model abc corps value of

Based on the corporate valuation model, ABC Corp's value of operations is $1,600 million. Its balance sheet shows $625 million of current assets which includes $125 million of short-term investments that are unrelated to ...

Normas cat food of shell knob ships cat food throughout the

Norma's Cat Food of Shell Knob ships cat food throughout the country. Norma has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two ...

Examine the following pairs of puts which differ only by

Examine the following pairs of puts, which differ only by exercise price. Determine if any violate the rules regarding relationships between American options that differ only by exercise price. a. August 155 and 160 b. O ...

Each of the following research studies uses a survey as a

Each of the following research studies uses a survey as a method for collecting data. However, not all of the studies are examples of the survey research design. Based on the information provided for each study, indicate ...

If the calculated value of f is found to be significant for

If the calculated value of F is found to be significant for the main effect of an independent variable with more than two levels, what tests does the researcher then conduct? Why are such tests not necessary if the indep ...

List two advantages from the investor point of view of an

List two advantages, from the investor point of view, of an exchange traded fund, vis-a-vis a closed-end fund? Distinguish between a defined benefit pension plan and a defined contribution plan? List at least three funct ...

Fresh fruit inc has a 1000 par value bond that is currently

Fresh Fruit, Inc. has a $1,000 par value bond that is currently selling for $1,277. it has an annual coupon rate of 12.86 percent, paid semiannually, and has 28-years remaining until maturity. What would the annual yield ...

1 what kinds of things do volunteer organizations provide

1. What kinds of things do volunteer organizations provide for victims in the aftermath of a disaster? 2. What is the Incident Command System, and why was it originally developed? 3. What are the five major management sy ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro