Assume a employee has a salary of $ 75,000. The employee's salary is expected to grow...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Assume a employee has a salary of $ 75,000. The employee's salary is expected to grow at 2.5% per annum. The employee is expected work 25 years and then retire. The pension program provides the employee a defined benefit equal to 2.0% of his salary in year 25 for each year worked. The employee has a expected life expectancy of 35 years at retirement. The firm uses a 4% discount rate to determine pension obligations. The firm anticipates depositing $9,000 at the end of each year to fund their retirement obligation. Funds are expected to earn and do earn 6.0 per cent per annum. 1. 2. 3. 4. 5. What is the pension cost in years 2 and 3 What is the over(under) pension funding at the end of year 3. Explain the logic for each of the three components of a firm's pension expense in any given year Change the discount rate to 5%. (corrected from an earlier posting that had it at 4%) What is the $ change in the underfunding in year 3? Explain the logic of the change in underfunding. Assume a employee has a salary of $ 75,000. The employee's salary is expected to grow at 2.5% per annum. The employee is expected work 25 years and then retire. The pension program provides the employee a defined benefit equal to 2.0% of his salary in year 25 for each year worked. The employee has a expected life expectancy of 35 years at retirement. The firm uses a 4% discount rate to determine pension obligations. The firm anticipates depositing $9,000 at the end of each year to fund their retirement obligation. Funds are expected to earn and do earn 6.0 per cent per annum. 1. 2. 3. 4. 5. What is the pension cost in years 2 and 3 What is the over(under) pension funding at the end of year 3. Explain the logic for each of the three components of a firm's pension expense in any given year Change the discount rate to 5%. (corrected from an earlier posting that had it at 4%) What is the $ change in the underfunding in year 3? Explain the logic of the change in underfunding.
Expert Answer:
Answer rating: 100% (QA)
In order to minimize costs the firm would choose point B which is the point where the isocost is ta... View the full answer
Related Book For
Managerial Economics and Business Strategy
ISBN: 978-0073523224
8th edition
Authors: Michael Baye, Jeff Prince
Posted Date:
Students also viewed these accounting questions
-
A firm produces output according to a production function Q = F(K,L) = min {2K,4L}. a. How much output is produced when K = 2 and L = 3? b. If the wage rate is $30 per hour and the rental rate on...
-
A firm produces output according to a production function Q = F (K, L) = min {4K, 8L}. a. How much output is produced when K = 2 and L = 3? b. If the wage rate is $ 60 per hour and the rental rate on...
-
Explain why a profit-maximizing firm must also minimize costs.
-
Which one of the following statements related to investigations of workplace harassment complaints under Ontario's OHSA is true? a) As a rule, such investigations should be completed with 120 days of...
-
Why does money have a time value?
-
Assume a very large normally distributed population of scores on a test with mean 70 and standard deviation 7. a. Find an interval that includes 95% of the population. b. Suppose you randomly sample...
-
7. ADMINISTRATIVE AGENCIES Congress creates federal administrative agencies with enabling legislation. The Administrative Procedure Act controls how agencies do their work. (p. 90)
-
Accounting Change Ramirez Co. decides at the beginning of 2010 to adopt the FIFO method of inventory valuation. Ramirez had used the LIFO method for financial reporting since its inception on January...
-
Schultz Industries is considering the purchase of ArrasManufacturing. Arras is currently a supplier for Schultz, and theacquisition would allow Schultz to better control its materialsupply. The cur 2...
-
Mercy, Nelly and Olive are in partnership sharing profits and losses equally after allowing for interest on capital at the rates of 5% per annum to the partners and a salary to Nelly of $ 60 per...
-
On January 1, Marigold Corp. had 54,800 shares of no-par common stock issued and outstanding. The stock has a stated value of $4 per share. During the year, the following transactions occurred. Apr....
-
The junction-to-case and case-to-air resistances of a 50-by-50 mm2 chip are 5C/W and 13C/W, respectively. It is assumed that the entire 7 W heat generated at the junction of this chip is dissipated...
-
Zinn Corp. has 3.50 million shares of common stock outstanding.The firm is in steady-state growth, and analysts expect the firm's earnings and dividends to continue to grow at their historical rate...
-
If two circular rods, one steel, and one copper, are both . 7 3 5 m long and 1 . 5 0 cm in diameter, each is subjected to a force with magnitude 3 8 5 0 N that compresses the rod what is the...
-
Two electrons in a vacuum exert force of F = 3 . 2 3 E - 0 8 N on each other. They are then moved so that they are separated by x = 5 . 1 times their original distance. How far apart, in meters, were...
-
Why is it important to record the professional de opportunities that you undertake for your current position and future employment?
-
The time and effort expended in the research process are A) worth it if the report results in increased corporate visibility B) always worth it if the client does follow-on studies C) wasted if the...
-
In a certain school district, 3% of the faculty use none of their sick days in a school year. Find the probability that 5 faculty members selected at random used no sick days in a given year.
-
According to The Wall Street Journal, Mitsubishi Motors recently announced a major restructuring plan in an attempt to reverse declining global sales. Sup-pose that as part of the restructuring plan...
-
Consider a competitive market served by many domestic and foreign firms. The domestic demand for these firms product is Qd 600 2P. The supply function of the domestic firms is QSD = 200 P, while that...
-
According to the American Metal Markets Magazine, the spot market price of U. S. hot rolled steel recently reached $ 600 per ton. Less than a year ago this same ton of steel was only $ 300. A number...
-
You will compute the (Fourier) convolution of two box functions of the same width. Recall that the box function is given by \[f_{a}(x)= \begin{cases}1, & |x| \leq a \\ 0, & |x|>a\end{cases}\]...
-
Define the integrals \(I_{n}=\int_{-\infty}^{\infty} x^{2 n} e^{-x^{2}} d x\). Noting that \(I_{0}=\sqrt{\pi}\), a. Find a recursive relation between \(I_{n}\) and \(I_{n-1}\). b. Use this relation...
-
Find the Laplace transform of the following functions: a. \(f(t)=9 t^{2}-7\). b. \(f(t)=e^{5 t-3}\). c. \(f(t)=\cos 7 t\) d. \(f(t)=e^{4 t} \sin 2 t\). e. \(f(t)=e^{2 t}(t+\cosh t)\). f. \(f(t)=t^{2}...
Study smarter with the SolutionInn App