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Compute the present value of the pension obligation to

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The company wants to have enough cash invested at December 31, 2016, to provide for all three employees. To accumulate enough cash, they will make three equal annual contributions to a fund that will earn 11% interest compounded annually. The first contribution will be made on December 31, 2013. Compute the amount of this required annual contribution.

Employee Annual Payment Date of First Payment
  Tinkers $ 20,000
12/31/16
  Evers
25,000
12/31/17
  Chance
30,000
12/31/18

Required:
1.

Compute the present value of the pension obligation to these three employees as of December 31, 2013. Assume an 11% interest rate.


2.

The company wants to have enough cash invested at December 31, 2016, to provide for all three employees. To accumulate enough cash, they will make three equal annual contributions to a fund that will earn 11% interest compounded annually. The first contribution will be made on December 31, 2013. Compute the amount of this required annual contribution.

Amount of annual contribution.

Reference no: EM13587459

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