Sachs Brands' defined benefit pension plan specifies annual
retirement benefits equal to: 1.6% × service years × final year's
salary, payable at the end of each year. Angela Davenport was hired
by Sachs at the beginning of 2004 and is expected to retire at the
end of 2038 after 35 years' service. Her retirement is expected to
span 18 years. Davenport's salary is $94,000 at the end of 2018 and
the company's actuary projects her salary to be $300,000 at
retirement. The actuary's discount rate is 8%. (FV of $1, PV of $1,
FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.)
Required:
2. Estimate by the projected benefits approach the amount
of Davenport's annual retirement payments earned as of the end of
2018.
3. What is the company's projected benefit
obligation at the end of 2018 with respect to Davenport?
(Do not round intermediate calculations. Round your final
answer to nearest whole dollar.)
4. If no estimates are changed in the meantime,
what will be the company's projected benefit obligation at the end
of 2021 (three years later) with respect to Davenport? (Do
not round intermediate calculations. Round your final answer to
nearest whole dollar.)
Answer:2 Calculation of the the projected benefits approach the amount of Davenport's annual retirement payments earned as of the end of 2018:
=1.6%*15 years*$94000= $22,560
Answer: 3
The present value of the retirement annuity as of the retirement date (end of 2038) is
=$22,560× 9.37189* = $211,430
* present value of an ordinary annuity of $1: n= 18, i= 8% (from PVA of $1)
It is the present value of the retirement benefits at the end of 2018:
$211,430 × 0.21455* = $45,362
* present value of $1: n= 20, i= 8% (from PV of $1)
Answer: 4
1.6 × 18 years × $94000 = $27,072
$27072 × 9.37189* = $253,716
$253716 × 0.27027** = $68572
* present value of an ordinary annuity of $1: n = 18, i = 8% (from PVA of $1)
** present value of $1: n = 17, i = 8% (from PV of $1)
Sachs Brands' defined benefit pension plan specifies annual retirement benefits equal to: 1.6% × service years × fin...
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Sachs Brands' defined benefit pension plan specifies annual retirement benefits equal to: 1.6% × service years × final year's salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2004 and is expected to retire at the end of 2038 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $94,000 at the end of 2018 and the company's actuary projects her salary to be $300,000 at...
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Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.3% x service years x final year's salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2007 and is expected to retire at the end of 2041 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $91,000 at the end of 2021 and the company's actuary projects her salary to be $285,000 at...
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