Question

Imprudential, Inc., has an unfunded pension liability of $415 million that must be paid in 20 years. To assess the value of the firm’s stock, financial analysts want to discount this liability back to the present. If the relevant discount rate is 5.2 percent, what is the present value of this liability?

Answer 1

PV= $150,568,214.5

Step-by-step explanation:

Giving the following information:

Future value (FV)= $415,000,000

Number of periods (n)= 20 years

Discount rate (i)= 5.2%

To calculate the present value, we need to use the following formula:

PV= FV/(1+i)^n

PV= 415,000,000 / (1.052^20)

PV= $150,568,214.5