Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
Normandin Inc
Normandin Inc. has an unfunded pension liability of $575 million that must be paid in 20 years. To assess the value of the firm's stock, financial analysts want to discount this liability back to the present.
If the relevant discount rate is 6.8%, what is the present value of this liability? (Enter your answer in dollars, not millions of dollars. Do not round intermediate calculations and round your final answer to 2 decimal places. Omit $ sign in your response.)
Present value $
Expert Solution
Calculation of Present Value of the Liability:
Present Value = Future Value / (1+Rate)^Number of Periods
Here,
Future Value (FV) = $575 million
Number of Periods (n) = 20 years
Relevant discount rate (r) = 6.8% = 0.068
Present Value = $575,000,000 / (1+0.068)^20
= $575,000,000 / 3.72756352855
Present Value = $154,256,257.63
Therefore, The present value of the the liability is $154,256,257.63
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
