How much is the present value of defined benefit obligation

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PELLUCID CLEAR Co. agrees to provide lump-sum ?12,000,000 retirement benefits to employees equal to 6% of final salary for each year of service. Information on an employee is shown below:

Average annual salary level on January 1, 20x1

Average annual salary increase starting January 1, 20x2 and every year thereafter.

3%

Average service lives before entitlement to retirement benefits (January 1, 20x1 to December 31, 20x5)

5 years

Discount rate per year

10%

Problem 1: How much is the present value of the defined benefit obligation on December 31, 20x2?

a. 1,908,117

b. 1,217,680

c. 1,298,437

d. 1,085,710

Reference no: EM132701380

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