Brooks Long expects to receive a $640,000 cash benefit when she retires five yea

Question

Brooks Long expects to receive a $640,000 cash benefit when she retires five years from today. Ms. Long’s employer has offered an early retirement incentive by agreeing to pay her $369,000 today if she agrees to retire immediately. Ms. Long desires to earn a rate of return of 10 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

Calculate the present value. (Round your final answer to the nearest dollar amount.)

Brooks Long expects to receive a $640,000 cash benefit when she retires five years from today. Ms. Long’s employer has offered an early retirement incentive by agreeing to pay her $369,000 today if she agrees to retire immediately. Ms. Long desires to earn a rate of return of 10 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

Explanation / Answer

Details Amt Discount factor @10% for 5 years=1/1.1^5=                           0.6209 PV of $640,000 receivable after 5 years=640000*0.6209=                         397,390 So The PV of the Cash benefit =$397,390 Early retirement incentive =$369,000 There will be a loss of $28,390 if the incentive accepted.

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