5. Hewlett Packard reported the following information on its U.S. retiree medical plan: Hewlett Packard reported...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
5. Hewlett Packard reported the following information on its U.S. retiree medical plan: Hewlett Packard reported the following information on its U.S. retiree medical plan: Key Assumptions 1998 1996 Discount rate Expected return on assets Current medical cost trend rate Ultimate medical cost trend rate Year current medical cost trend rate decreases to ultimate rate Effect of a 1% increase in the medical cost trend rate (millions): Increase in benefit obligation Increase in annual retiree medical cost 6.5% 9.0% plan changes Prepaid (accrued) costs 8.65% 5.5% 2007 $116 $17 Funding Status (in millions) Fair value of plan assets Benefit obligation Plan assets in excess of (less than) benefit obligation Unrecognized net experience (gain) loss Unrecognized prior service cost (benefit) related to 1997 7.0% 9.0% 9.6% 6.0% 2007 $101 $15 1998 $503 (543) (40) (255) (144) $(439) 7.5% 9.0% 10.0% 6.0% 2007 $90 $13 1997 $448 (475) (27) (268) (154) $(449) What assumption is Hewlett Packard making about medical cost inflation in 2000 and 2010? What is the firm assuming it will earn on plan assets? As a financial ana lyst, how would you evaluate these assumptions? Are these rates reasonable? 5. Hewlett Packard reported the following information on its U.S. retiree medical plan: Hewlett Packard reported the following information on its U.S. retiree medical plan: Key Assumptions 1998 1996 Discount rate Expected return on assets Current medical cost trend rate Ultimate medical cost trend rate Year current medical cost trend rate decreases to ultimate rate Effect of a 1% increase in the medical cost trend rate (millions): Increase in benefit obligation Increase in annual retiree medical cost 6.5% 9.0% plan changes Prepaid (accrued) costs 8.65% 5.5% 2007 $116 $17 Funding Status (in millions) Fair value of plan assets Benefit obligation Plan assets in excess of (less than) benefit obligation Unrecognized net experience (gain) loss Unrecognized prior service cost (benefit) related to 1997 7.0% 9.0% 9.6% 6.0% 2007 $101 $15 1998 $503 (543) (40) (255) (144) $(439) 7.5% 9.0% 10.0% 6.0% 2007 $90 $13 1997 $448 (475) (27) (268) (154) $(449) What assumption is Hewlett Packard making about medical cost inflation in 2000 and 2010? What is the firm assuming it will earn on plan assets? As a financial ana lyst, how would you evaluate these assumptions? Are these rates reasonable?
Expert Answer:
Answer rating: 100% (QA)
Hewlett Packard is assuming a medical cost trend rate of 55 in 2000 and 2010 This is the ultimate me... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-1119048534
11th Canadian edition Volume 1
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy
Posted Date:
Students also viewed these finance questions
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
Using Exhibit 12-1, determine the life expectancy of a 40-year old male.
-
Search and write a response to a Cyber Security Attack on an Organization or Company that has been in the News in the last two years. play the role of a Chief Executive Officer, CEO, Chief...
-
Refer to Exercises 102 and 106. Identify any outliers in the distribution. Show your work. Exercises 102 and 106. Here is a dotplot of the amount of fat (to the nearest gram) in 12 different...
-
Plaintiff sought to enforce against the defendant estate a promise made by his now-deceased uncle to pay Plaintiff a sum of money if Plaintiff refrained from the use of alcohol and tobacco for a...
-
Stellar Inc. is a construction company specializing in custom patios. The patios are constructed of concrete, brick, fiberglass, and lumber, depending upon customer preference. On June 1, 2012, the...
-
3. The length of the biceps muscle increases 1.7cm over the course of an overhead softball throw. The stiffness constant for the biceps is 225,000 N/cm. Calculate the strain potential energy (in Nm)...
-
1. Within days of the triplets arrival, Jamie Lee and Ross began researching and comparing various agencies for the purchase of a life insurance policy. What characteristics should Ross look for when...
-
Zane will pay you $700 every year for 25 years beginning next year, but the payment will grow at 4% per year and discount rate is 6%. What is the PV of this cash flows
-
BP at a glance We are a global energy company with wide reach across the worlds energy system. We have operations in Europe, North and South America, Australasia, Asia and Africa. Extracts from...
-
Define the following: shooting rights G&G costs carrying costs dry-hole contribution bottom-hole contribution
-
Discuss why each party to a test-well contribution situation would enter into the transaction.
-
Look back to the Real World Case at the start of the chapter. The accounting policies for two types of provision are explained in detail. They can be summarised by reference to the accounting...
-
Key elements of the use case diagram are (a) people, computers (b) actors, use-cases (c) people, classes, and objects (d) uses, cases
-
Are the existing Hindu and Christian laws being compatible in the modern era? Give your suggestions for improving both laws in Bangladesh.
-
Rewrite Programming Exercise 7.5 using streams. Display the numbers in increasing order. Data from Programming Exercise 7.5 Write a program that reads in 10 numbers and displays the number of...
-
Octavio Corp. prepares financial statements annually on December 31, its fiscal year end. At December 31, 2017, the company has the account Investments in its general ledger, containing the following...
-
Milford Company determined its ending inventory at cost and at lower of cost and net realizable value at December 31, 2015, 2016, and 2017, as follows: Instructions (a) Prepare the journal entries...
-
Iskra Vremec and Colin McFee are experienced scuba divers who have spent many years in the salvage business. About a year ago, they decided to start their own company to recover damaged and sunken...
-
Kids Sports Consulting Pty Ltd is a company set up by sports and recreation management students to gain experience in running their own business. It had the following contribution margin income...
-
V. Zarb, the marketing manager for Maltese Treasures Ltd, is preparing a sales budget for the year ended 30 June 2020. In reviewing the actual sales data for the previous year, the sales and...
-
The following expenses budget has been prepared for Abacus Services for the year ending 30 June 2020. Professional salaries, secretarial wages and training are paid in the quarter in which they are...
Python Programming 101 Starting With A Versatile Language 1st Edition - ISBN: B0CKVLFQD2 - Free Book
Study smarter with the SolutionInn App