Consolidated Industries is planning to operate for 10 more years and then cease operations. At that time (in 10 years), it expects to have the following pension benefit obligations: Year 11-15 16-20 Annual Total Payment $3,100,000 2,600,000 2,100,000 21-25 26-30 31-35 1,600,000 1,100,000 The current value of the firm's pension fund is $6.5 million. Assume that all cash flows occur at year-end. a. Consolidated's expected return on pension assets is 6%, and it uses 6% to discount the expected pension benefit payments. What is the present value of the firm's pension fund benefits? Do not round intermediate calculations. Round your answer to the nearest dollar. $ b. Is the plan underfunded or overfunded? Do not round intermediate calculations. Round your answer to two decimal places. Funding ratio = which means the assets are -Select- than the PV of benefits and the plan is -Select-
Consolidated Industries is planning to operate for 10 more years and then cease operations. At that time (in 10 years), it expects to have the following pension benefit obligations: Year 11-15 16-20 Annual Total Payment $3,100,000 2,600,000 2,100,000 21-25 26-30 31-35 1,600,000 1,100,000 The current value of the firm's pension fund is $6.5 million. Assume that all cash flows occur at year-end. a. Consolidated's expected return on pension assets is 6%, and it uses 6% to discount the expected pension benefit payments. What is the present value of the firm's pension fund benefits? Do not round intermediate calculations. Round your answer to the nearest dollar. $ b. Is the plan underfunded or overfunded? Do not round intermediate calculations. Round your answer to two decimal places. Funding ratio = which means the assets are -Select- than the PV of benefits and the plan is -Select-
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![Consolidated Industries is planning to operate for 10 more years and then cease operations. At that time (in 10 years), it expects to have the following
pension benefit obligations:
Year
11-15
16-20
Annual Total Payment
$3,100,000
2,600,000
2,100,000
21-25
26-30
31-35
1,600,000
1,100,000
The current value of the firm's pension fund is $6.5 million. Assume that all cash flows occur at year-end.
a. Consolidated's expected return on pension assets is 6%, and it uses 6% to discount the expected pension benefit payments. What is the
present value of the firm's pension fund benefits? Do not round intermediate calculations. Round your answer to the nearest dollar.
$
b. Is the plan underfunded or overfunded? Do not round intermediate calculations. Round your answer to two decimal places.
Funding ratio =
which means the assets are -Select- than the PV of benefits and the plan is -Select-](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe75b8e5a-8afc-4efd-a85c-5125d8cb0e4d%2F1817b6de-1616-437d-bbd7-ef83301bb6ce%2Fqgqvqa_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consolidated Industries is planning to operate for 10 more years and then cease operations. At that time (in 10 years), it expects to have the following
pension benefit obligations:
Year
11-15
16-20
Annual Total Payment
$3,100,000
2,600,000
2,100,000
21-25
26-30
31-35
1,600,000
1,100,000
The current value of the firm's pension fund is $6.5 million. Assume that all cash flows occur at year-end.
a. Consolidated's expected return on pension assets is 6%, and it uses 6% to discount the expected pension benefit payments. What is the
present value of the firm's pension fund benefits? Do not round intermediate calculations. Round your answer to the nearest dollar.
$
b. Is the plan underfunded or overfunded? Do not round intermediate calculations. Round your answer to two decimal places.
Funding ratio =
which means the assets are -Select- than the PV of benefits and the plan is -Select-
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