Question

For each of the following, compute the present value (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.):

  

Imprudential, Inc., has an unfunded pension liability of $582 million that must be paid in 20 years. To assess the value of the firm’s stock, financial analysts want to discount this liability back to the present.    If the relevant discount rate is 7.5 percent, what is the present value of this liability? (Enter your answer in dollars not in millions, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

Given,

Unfunded pension liability = $ 582 million or $ 582000000

Discount rate = 7.5% or 0.075

Period = 20 years

Solution :-