Homework Answers
Answer:
2.)
| Calculation of present value of net benefits | |||
| Year | Net Cash (a) | Present Value of $1 (n=1-5; i=5%) (b) | Present Value(c)=(a)x(b) |
| 2027 | $5,700 | 0.95238 | $5,428.57 |
| 2028 | $6,100 | 0.90703 | $5,532.88 |
| 2029 | $4,000 | 0.86384 | $3,455.36 |
| 2030 | $4,200 | 0.82270 | $3,455.34 |
| 2031 | $4,500 | 0.78353 | $3,525.89 |
| Total | $21,398.04 | ||
3.)
The EPBO is the present value of lump-sum net benefits.
The present value of $1 rate of 5% for 5 periods is 0.78353
EPBO at the end of 2021 = present value of Lum-sum
net benefit
=$21,398 x 0.78353
=$16,766
4.)
APBO at the end of 2021 = EPBO x (Full eligibility
period/Attribution period)
=$16,766 x (23 years (From 1998 to 2021)/26 years (From 1998 to
2024))
=$14,831
5.)
The EPBO is the present value of lump-sum net benefits
The present value of $1 at rate of 5% for 4 periods is
0.82270
EPBO at the end of 2022 = Present value of
Lump-sum net benefit
=$21,398 x 0.82270
=$17,604
APBO at the end of 2022 = EPBO x (Full
eligibility period/Attribution period)
=$16,766 x (24 years (From 1998 to 2022)/26 years (From 1998 to
2024))
=$15,476
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