ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
Question
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Chapter 9A, Problem 10P

a)

To determine

The value of the account of new employee after 10 years.

a)

Expert Solution
Check Mark

Answer to Problem 10P

The value of the account after 10 years will be $64913.

Explanation of Solution

He puts 4% percent of his salary into her new account and her employer will put 3% of her salary to her retirement account, so her account can be accounted as:

    YearSalary(increasing 2.5% every year) Employee commitmentEmployer commitmentTotal contribution of employee and employer
    065000260026005200
    166625266526655330
    268291273227325463
    369998280028005600
    471748287028705740
    573542294229425883
    675380301530156030
    777265309130916181
    879196316831686336
    981176324732476494
    1083205332833286656
    Total64913

The value of the account after 10 years will be $64913.

Economics Concept Introduction

Introduction: Retirement account is an investing tool that an individual uses to save his earnings for retirement. Some percentage of the annual earning of the employee is deposited into retirement account while same amount is also deposited by employer in the retirement account. As the salary increase annually due to increment the amount of deposit by both employer and employee also increase likewise.

b)

To determine

The value of employer’s matching fund.

b)

Expert Solution
Check Mark

Answer to Problem 10P

The value of employer’s matching fund will be $32458

Explanation of Solution

    YearSalary(increasing 2.5% every year) Employer commitment
    0650002600
    1666252665
    2682912732
    3699982800
    4717482870
    5735422942
    6753803015
    7772653091
    8791963168
    9811763247
    10832053328
    Total32458

The value of employer’s matching fund will be $32458

Economics Concept Introduction

Introduction: Retirement account is an investing tool that an individual uses to save his earnings for retirement. Some percentage of the annual earning of the employee is deposited into retirement account while same amount is also deposited by employer in the retirement account. As the salary increase annually due to increment the amount of deposit by both employer and employee also increase likewise.

c)

To determine

The value of the account of new employee after 40 years.

c)

Expert Solution
Check Mark

Answer to Problem 10P

The value of the account after 40 years will be $364444

Explanation of Solution

    YearSalary(increasing 2.5% every year) Employee commitment (4% of salary)Employer commitment (4% of salary)Total contribution of employee and employer
    065000260026005200
    166625266526655330
    268291273227325463
    369998280028005600
    471748287028705740
    573542294229425883
    675380301530156030
    777265309130916181
    879196316831686336
    981176324732476494
    1083205332833286656
    1185285341134116822
    1284717349734976993
    1389603358435847168
    1491843367336737347
    1594139376537657531
    1696492386038607719
    1798905395639567912
    18101377405540558110
    19103912415641568312
    20106510426042608520
    21109172436743678733
    22111902447644768952
    23114699458745879174
    24117567470347039406
    25120506482048209640
    26123519494149419882
    271266075064506410128
    281297725191519110382
    291330165321532110641
    301363415453545310907
    311397505590559011180
    321432445730573011460
    331468255873587311746
    341504956020602012040
    351542586170617012340
    361581146325632512649
    371620676482648212965
    381661196645664513290
    391702726810681013620
    401745296981698113962
    Total364444

The value of the account after 40 years will be $364444

Economics Concept Introduction

Introduction: Retirement account is an investing tool that an individual uses to save his earnings for retirement. Some percentage of the annual earning of the employee is deposited into retirement account while same amount is also deposited by employer in the retirement account. As the salary increase annually due to increment the amount of deposit by both employer and employee also increase likewise.

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