The State of Confusion wants to change the current retirement policy for state employees. To do so, however, the state must pay the current pension fund members the present value of their promised future payments. There are 230,000 current employees in the state pension fund. The average employee is 16 years away from retirement, and the average promised future retirement benefit is $380,000 per employee. If the state has a discount rate of 4% on all its funds, how much money will the state have to pay to the employees before it can start a new pension plan?

The State of Confusion wants to change the current retirement policy for state employees. To do so, however, the state must pay the current pension fund members the present value of their promised future payments. There are 230,000 current employees in the state pension fund. The average employee is 16 years away from retirement, and the average promised future retirement benefit is $380,000 per employee. If the state has a discount rate of 4% on all its funds, how much money will the state have to pay to the employees before it can start a new pension plan?

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 24E

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P3-11 (similar to) Present value. The State of Confusion wants to change the current retirement policy for state employees. To do so, however, the state must pay the current pension fund members the present value of their promised future payments. There are 210,000 current employees in the state pension fund. The average employee is 16 years away from retirement, and the average promised future retirement benefit is $420,000 per employee. If the state has a discount rate of 6.5% on all its funds, how much money will the state have to pay to the employees before it can start a new pension plan? How much money will the state have to pay to the employees before it can start a new pension plan? (Round to the nearest dollar)
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