Question

Compute the present value of the pension obligation to these three employees as of December 31, 2021. Assume an 11% interest rate. 2. The company wants to have enough cash invested at December 31, 2024, to provide for all three employees. To accumulate enough cash, they will make three equal annual contributions to a fund that will earn 11% interest compounded annually

Answer 1

Answer:

1.

Tinkers:

PVA = $20,000 × 7.19087* = $143,817

*Present value of an ordinary annuity of $1: n = 15, i = 11% (from PVA of $1)

PV = $143,817 × 0.81162* = $116,725

*Present value of $1: n = 2, i = 11% (from PV of $1)

Evers:

PVA = $25,000 × 7.19087* = $179,772

*Present value of an ordinary annuity of $1: n = 15, i = 11% (from PVA of $1)

PV = $179,772 × 0.73119* = $131,447

*Present value of $1: n = 3, i = 11% (from PV of $1)

Chance:

PVA = $30,000 × 7.19087* = $215,726

*Present value of an ordinary annuity of $1: n = 15, i = 11% (from PVA of $1)

PV = $215,726 × 0.65873* = $142,105

*Present value of $1: n = 4, i = 11% (from PV of $1)

Answer 2

Answer:

The question is not completed but the complete question is in the explanation section below and the solution is attached in the pictures.

Explanation:

Three employees of the Horizon Distributing Company will receive annual pension payments from the company when they retire. The employees will receive their annual payments for as long as they live. Life expectancy for each employee is 14 years beyond retirement. Their names, the amount of their annual pension payments, and the date they will receive their first payment are shown below: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Employee Annual Payment Date of

First

Payment

Tinkers $ 27,000 12/31/24

Evers $ 32,000 12/31/25

Chance $ 37,000 12/31/26