Exercise 4 You Are The Cfo Of Termination Inc Your Company Has 40 Employees Each Earning 40 000 Per Year Employee 1 (216.59 KiB) Viewed 49 times
Exercise - 4 You are the CFO of Termination, Inc. Your company has 40 employees, each earning $40,000 per year. Employee salaries grow at 4% per year. Starting from next year, and every second year thereafter, 8 employees retire and no new employees are recruited. Your company has in place a retirement plan that entitles retired workers to an annual pension, which is equal to their annual salary at the moment of retirement. Life expectancy is 20 years after retirement, and the annual pension is paid at year end. The return on investment is 10% per year. What is the total value of your pension liabilities?
B D E F G H I J A Workforce Life expectancy Annual initial salary Salary yearly growth Annual return C 40 20 Hint: Today is Year 0. 40,000 4% 10% DISCOUNT TO TODAY'S MONEY PV of Pension Liability Year Retirees Pension Liability at Retirement Salary Retirement 1 2 3 4 5 6 7 8 9 Total 0 =SUM(B8:B16) Total value of pension
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