Deciding between two health insurance policies

Assignment Help Financial Management

Reference no: EM131328107

Haverland Consulting is deciding between two health insurance policies. Haverland has 17 employees.

Benefits for All would require $134909 today, and would then charge $11039 per employee per year. Benefits for All requires a 3-year contract. Note that the charge per employee will begin at the end of year 1 and the final payment will occur at the end of year 3.

HealthPlus requires a 4-year contract. HealthPlus charges $38650 per year, with the first payment occurring at the end of year 1 and the last payment occurring at the end of year 4. The charge will increase by 15% each subsequent year. If Haverland can enroll all of its employees in a healthy living course, HealthPlus will provide a rebate of $7381 at the end of year 4. Assume that Haverland is able to enroll all of its employees in the course.

Assume an interest rate of 3%, compounded annually. Comparing the two policies, what is the equivalent uniform annual worth (EUAW) of Benefits for All ?

Reference no: EM131328107

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