Question

Imprudential, inc., has an unfunded pension liability of $582 million that mustb be paid in 20 years. To assess the value of the firms stock, financialal analysts to discount the liability back to the present
If the relevant discount rate is 7.5 percent, what is the present value of this liability? (Enter your answer in dollars not in millions, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

Present value $137,010,452.17

Explanation:

Calculation for the present value of Imprudential, inc. liability

Using this formula

Present Value = FV / (1 + r)^t

Where,

FV =$582,000,000

=(1 + r)=(1+0.075=1.075)

t=20 Years

Let plug in the formula

Present Value = $582,000,000 / (1.075)^20

Present Value=$582,000,000/4.2478511

Present value= $137,010,452.17

Therefore the present value of Imprudential, inc. liability will be $137,010,452.17