Oregon Co.'s employees are eligible for retirement with benefits at the end of the year in which both age 60 is attained and they have completed 35 years of service. The benefits provide 15 years’ reimbursement for health care services of $26,000 annually, beginning one year from the date of retirement. Ralph Young was hired at the beginning of 1991 by Oregon after turning age 22 and is expected to retire at the end of 2029 (age 60). The discount rate is 5%. The plan is unfunded. The PV of an ordinary annuity of $1 where n = 15 and i = 5% is 10.37966. The PV of $1 where n = 2 and i = 5% is 0.90703. What is the present value of Ralph's net benefits as of his expected retirement date, rounded to the nearest dollar?
Oregon Co.'s employees are eligible for retirement with benefits at the end of the year in which both age 60 is attained and they have completed 35 years of service. The benefits provide 15 years’ reimbursement for health care services of $26,000 annually, beginning one year from the date of retirement.
Ralph Young was hired at the beginning of 1991 by Oregon after turning age 22 and is expected to retire at the end of 2029 (age 60). The discount rate is 5%. The plan is unfunded.
The PV of an ordinary
The PV of $1 where n = 2 and i = 5% is 0.90703.
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