Posted: March 30th, 2016

Identify the factors that cause the present value of retirement benefits to be less then $500,000.

Qunitana Pena expects to receive a $500,000 cash benefit when she retires five years from today. Ms. Pena s employer has offered an early retirement incentive by agreeing to pay her $300,000 today if she agrees to retire immediately. Ms. Pena desires to earn a rate of return of 12%.

a. Assuming that the retirement benefit is the only consideration in making the retirement decision, should Ms. Pena accept her employer s offer?

b. Identify the factors that cause the present value of retirement benefits to be less then $500,000.