Sussex Retails hired a new sales manager on January 1, 2022. The manager is eligible to participate in the company’s defined-benefit pension plan. Under the plan, the manager is promised an annual payment of 3% of his final annual salary for each year of service. The annual salary is paid once at the end of a year. The pension benefit will be paid at the end of each year, beginning one year after retirement. The manager’s starting annual salary is £70,000. Other assumptions are as follows: The discount rate is 8%.Annual salary will increase by 4% per year. The manager will work for 25 years before retirement. The manager will live for 20 years after retirement and receive 20 annual pension benefit payments. Calculate the projected benefit obligation (PBO) at the end of the first year of the manager’s employment.

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The projected benefit obligation PBO is an accounting method to project the future pension liabilities that a company can expect to pay their employee... View the full answer