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

1 consider the various means comparison procedures that

1. Consider the various means comparison procedures that have been discussed in this appendix, and indicate the advantages and disadvantages of each. 2. What is the difference between exploratory factor analysis and conf ...

1 what is the logic of the percentage-of-sales method for

1. What is the logic of the percentage-of-sales method for constructing pro forma financial statements? On a year-to-year basis, which balance sheet and income statement items do you think will fluctuate most closely wit ...

Part -11interest income how can gross interest income rise

Part -1: 1) Interest Income. How can gross interest income rise while the net interest margin remains somewhat stable for a particular bank? 2) Bank Leverage. What does the assets/equity ratio of a bank indicate? 3) Loan ...

1 what is the only relevant decision for independent

1. What is the only relevant decision for independent projects if an unlimited capital budget exists? How does your response change if the projects are mutually exclusive? How does your response change if the firm faces ...

1 how has transportation cost as a percentage of total

1. How has transportation cost, as a percentage of total logistics cost, tracked since 1980? 2. Describe the logistics value proposition. Be specific regarding specific customer accommodation and cost. 3. Describe the fu ...

1 what is the difference between global remuneration and

1. What is the difference between global remuneration and international assignment compensation? 2. What are the major issues related to the effectiveness of global remuneration plans? 3. How are equity compensation plan ...

The following company overview of aig risk finance was

The following "Company Overview" of AIG Risk Finance was described on the Internet (investing.businessweek.com/research/stocks/ private/snapshot.asp?privcapId=11673577): AIG Risk Finance designs and implements risk finan ...

Abc inc just paid a dividend of 225 and the dividends are

ABC INC just paid a dividend of $2.25 and the dividends are expected to indefinitely grow at a constant 2.8% rate. If investors require a return of 11.8% from this stock, what is the value of the ABC stock? Write in the ...

1 describe the basic problem that threatens internal

1. Describe the basic problem that threatens internal validity for nonequivalent group designs. 2. Give an example of a between-subjects nonexperimental design and a between subjects quasi-experimental design. Explain wh ...

A project has initial outlay of 2791 it has a single payoff

A project has initial outlay of $2791. It has a single payoff at the end of year 4 of $8578. what is the profitability index (PI) of the project, if the company's cost of capital is 6.06 percent.

  • 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

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

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen