Shuai is 43 years old and has been asked to accept early retirement from his company. The company offered Shuai three alternativecompensation packages to induce Shuai to retire:1. $231,000 cash payment to be paid immediately.2. A 20-year annuity of $22,000 beginning immediately.3. A 10-year annuity of $75,000 beginning on July 1 of the year Shuai reaches age 53 (after 10 years).Required:Determine the present value of each alternative, assuming that Shuai is able to invest funds at a 8% rate. Which alternative should hechoose?Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVAof $1, PVA of $1, FVAD of $1 and PVAD of $1)Alternative123Shuai should choosePV

Alternative 1 :Immediate cash payment paid = $231,000Alternative 2:Number of years = 20 yearsAnnuity…

Answered: Shuai is 43 years old and has been…

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

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achs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.4% × service years × 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 $97,000 at the end of 2021 and the company's actuary projects her salary to be $315,000 at retirement. The actuary's discount rate is 7%. (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.) Estimate by the projected benefits approach the portion of Davenport's annual retirement payments attributable to 2021 service.3. What is the company's service cost for 2021 with respect to Davenport? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.)4. What is the company's interest cost for 2021 with respect to Davenport?…
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