Calculating Present Values (L02) Normandin Inc

Finance Feb 03, 2021

Calculating Present Values (L02) Normandin Inc. has an unfunded pension liability of $575 million that must be paid in 20 sears. To asses the value of the firm's stock. financial analysts want to ltahihtti hatA to the present. If the relevant discount rate is 6..8%. u het prek.ent thi1

Expert Solution

Computation of Present Value of Liability:

Present Value = Future Value / (1+Rate)^Number of Periods

Here,

Future Value = $575 millions

Rate = 6.8% or 0.068

Number of Periods = 20 years

Present Value = $575 / (1+0.068)^20 = $154.26 million

So, Present Value of Liability is $154.26 millions.

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