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Three employees of the Horizon Distributing Company will receive annual pension payments from the company when they retire. The employees will receive their annual payments for as long as they live. Life expectancy for each employee is 15 years beyond retirement. Their names, the amount of their annual pension payments, and the date they will receive their first payment are shown below: (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.) Employee Annual Payment Tinkers Evers Chance $24,000 29,000 34,000 Required: 1. Compute the present value of the pension obligation to these three employees as of December 31, 2016. Assume a 12% interest rate. Employee Tinkers Evers Chance PV Date of First Payment 12/31/19 12/31/20 12/31/21 2. The company wants to have enough cash invested at December 31, 2019, to provide for all three employees. To accumulate enough cash, they will make three equal annual contributions to a fund that will earn 12% interest compounded annually. The first contribution will be made on December 31, 2016. Compute the amount of this required annual contribution. Amount of annual contribution

Three employees of the Horizon Distributing Company will receive annual pension payments from the company when they retire. The employees will receive their annual payments for as long as they live. Life expectancy for each employee is 15 years beyond retirement. Their names, the amount of their annual pension payments, and the date they will receive their first payment are shown below: (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.) Employee Annual Payment Tinkers Evers Chance $24,000 29,000 34,000 Required: 1. Compute the present value of the pension obligation to these three employees as of December 31, 2016. Assume a 12% interest rate. Employee Tinkers Evers Chance PV Date of First Payment 12/31/19 12/31/20 12/31/21 2. The company wants to have enough cash invested at December 31, 2019, to provide for all three employees. To accumulate enough cash, they will make three equal annual contributions to a fund that will earn 12% interest compounded annually. The first contribution will be made on December 31, 2016. Compute the amount of this required annual contribution. Amount of annual contribution

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Three employees of the Horizon Distributing Company will receive annual pension payments from the company when they retire. The employees will receive their annual payments for as long as they live. Life expectancy for each employee is 15 years beyond retirement. Their names, the amount of their annual pension payments, and the date they will receive their first payment are shown below: (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.) Employee Annual Payment Tinkers Evers Chance $24,000 29,000 34,000 Required: 1. Compute the present value of the pension obligation to these three employees as of December 31, 2016. Assume a 12% interest rate. Employee Tinkers Evers Chance PV Date of First Payment 12/31/19 12/31/20 12/31/21 2. The company wants to have enough cash invested at December 31, 2019, to provide for all three employees. To accumulate enough cash, they will make three equal annual contributions to a fund that will earn 12% interest compounded annually. The first contribution will be made on December 31, 2016. Compute the amount of this required annual contribution. Amount of annual contribution
Transcribed Image Text:Three employees of the Horizon Distributing Company will receive annual pension payments from the company when they retire. The employees will receive their annual payments for as long as they live. Life expectancy for each employee is 15 years beyond retirement. Their names, the amount of their annual pension payments, and the date they will receive their first payment are shown below: (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.) Employee Annual Payment Tinkers Evers Chance $24,000 29,000 34,000 Required: 1. Compute the present value of the pension obligation to these three employees as of December 31, 2016. Assume a 12% interest rate. Employee Tinkers Evers Chance PV Date of First Payment 12/31/19 12/31/20 12/31/21 2. The company wants to have enough cash invested at December 31, 2019, to provide for all three employees. To accumulate enough cash, they will make three equal annual contributions to a fund that will earn 12% interest compounded annually. The first contribution will be made on December 31, 2016. Compute the amount of this required annual contribution. Amount of annual contribution
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