Clark Industries has a defined benefit pension plan that specifies annual, year-end retirement benefits equal to: 1.5% Service years Final year's salary Stanley Mills was hired by Clark at the beginning of 2005 Mills is expected to retire at the end of 2049 after 45 years of service. His retirement is expected to span 15 years. At the end of 2024, 20 years after being hired, his salary is $94,000. The company's actuary projects Mills's salary to be $410,000 at retirement. The actuary's discount rate is 6% For all requirements, round final answers to the nearest whole dollars. Do not round Intermediate calculations. Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) Required: 1. Estimate the amount of Stanley Mills's annual retirement payments for the 15 retirement years earned as of the end of 2024. 2. Suppose Clark's pension plan permits a lump-sum payment at retirement In lieu of annuity payments. Determine the lump-sum equivalent as the present value as of the eamed retirement annulty at the expected date of retirement (the end of 2049). 3. What is the company's projected benefit obligation at the end of 2024 with respect to Stanley Mills? 4. Even though pension accounting centers on the PBO calculation, the ABO still must be disclosed in the pension disclosure note. What is the company's accumulated benefit obligation at the end of 2024 with respect to Stanley Mills? 5. If we assume no estimates change in the meantime, what is the company's projected benefit obligation at the end of 2025 with respect to Stanley Mills? 6. What portion of the 2025 increase in the PBO is attributable to 2025 service (the service cost component of pension expense) and to accrued interest (the interest cost component of pension expense)? Answer is complete but not entirely correct. 1. Annual retirement payments S 37.600 2. PV of retirement annuity 390,169 3. Projected benefit obligation S 390.169 4. Accumulated benefit obligation S 37,600 5. Projected benefit obligation s 724.527 C 6. Interest cost S 302.154 6. Service cost S 32.204
Clark Industries has a defined benefit pension plan that specifies annual, year-end retirement benefits equal to: 1.5% Service years Final year's salary Stanley Mills was hired by Clark at the beginning of 2005 Mills is expected to retire at the end of 2049 after 45 years of service. His retirement is expected to span 15 years. At the end of 2024, 20 years after being hired, his salary is $94,000. The company's actuary projects Mills's salary to be $410,000 at retirement. The actuary's discount rate is 6% For all requirements, round final answers to the nearest whole dollars. Do not round Intermediate calculations. Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) Required: 1. Estimate the amount of Stanley Mills's annual retirement payments for the 15 retirement years earned as of the end of 2024. 2. Suppose Clark's pension plan permits a lump-sum payment at retirement In lieu of annuity payments. Determine the lump-sum equivalent as the present value as of the eamed retirement annulty at the expected date of retirement (the end of 2049). 3. What is the company's projected benefit obligation at the end of 2024 with respect to Stanley Mills? 4. Even though pension accounting centers on the PBO calculation, the ABO still must be disclosed in the pension disclosure note. What is the company's accumulated benefit obligation at the end of 2024 with respect to Stanley Mills? 5. If we assume no estimates change in the meantime, what is the company's projected benefit obligation at the end of 2025 with respect to Stanley Mills? 6. What portion of the 2025 increase in the PBO is attributable to 2025 service (the service cost component of pension expense) and to accrued interest (the interest cost component of pension expense)? Answer is complete but not entirely correct. 1. Annual retirement payments S 37.600 2. PV of retirement annuity 390,169 3. Projected benefit obligation S 390.169 4. Accumulated benefit obligation S 37,600 5. Projected benefit obligation s 724.527 C 6. Interest cost S 302.154 6. Service cost S 32.204
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:Clark Industries has a defined benefit pension plan that specifies annual, year-end retirement benefits equal to:
1.5% × Service years Final year's salary
Stanley Mills was hired by Clark at the beginning of 2005.
Mills is expected to retire at the end of 2049 after 45 years of service.
His retirement is expected to span 15 years. At the end of 2024, 20 years after being hired, his salary is $94,000.
The company's actuary projects Mills's salary to be $410,000 at retirement. The actuary's discount rate is 6%
For all requirements, round final answers to the nearest whole dollars. Do not round Intermediate calculations. Use tables, Excel,
or a financial calculator. (FV of $1. PV of $1. EVA of $1. PVA of $1. FVAD of $1 and PVAD of $1)
Required:
1. Estimate the amount of Stanley Mills's annual retirement payments for the 15 retirement years earned as of the end of 2024.
2. Suppose Clark's pension plan permits a lump-sum payment at retirement In lieu of annuity payments. Determine the lump-sum
equivalent as the present value as of the eamed retirement annulty at the expected date of retirement (the end of 2049).
3. What is the company's projected benefit obligation at the end of 2024 with respect to Stanley Mills?
4. Even though pension accounting centers on the PBO calculation, the ABO still must be disclosed in the pension disclosure note.
What is the company's accumulated benefit obligation at the end of 2024 with respect to Stanley Mills?
5. If we assume no estimates change in the meantime, what is the company's projected benefit obligation at the end of 2025 with
respect to Stanley Mills?
6. What portion of the 2025 increase in the PBO is attributable to 2025 service (the service cost component of pension expense) and
to accrued interest (the Interest cost component of pension expense)?
Answer is complete but not entirely correct.
1. Annual retirement payments
2. PV of retirement annuity
3. Projected benefit obligation
4. Accumulated benefit obligation
5. Projected benefit obligation
6. Interest cost
6. Service cost
S
37.600
S
390,169
S
390,169
5
37,600x
S
724,527x
5
302.154
S
32,204
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