(Pension Funding) You have been hired as a benefit consultant by Maugarite Alomar, the owner of Attic Angels. She wants to establish a retirement plan for herself and her three employees. Maugarite has provided the following information: The retirement plan is to be based upon annual salary for the

last year before retirement and is to provide 50% of Maugarite’s last-year annual salary and 40% of the last-year annual salary for each employee. The plan will make annual payments at the beginning of each year for 20 years from the date of retirement. Maugarite wishes to fund the plan by making 15 annual deposits beginning January 1, 2003. Invested funds will earn 12% compounded annually. Information about plan participants as of January 1, 2003, is as follows.

Maugarite Alomar, owner: Current annual salary of $40,000; estimated retirement date January 1, 2028.

Kenny Rogers, flower arranger: Current annual salary of $30,000; estimated retirement date January

1, 2033.

Anita Baker, sales clerk: Current annual salary of $15,000; estimated retirement date January 1, 2023.

Willie Nelson, part-time bookkeeper: Current annual salary of $15,000; estimated retirement date January 1, 2018.

In the past, Maugarite has given herself and each employee a year-end salary increase of 4%. Maugarite plans to continue this policy in the future.

(a) Based upon the above information, what will be the annual retirement benefit for each plan participant?

(Round to the nearest dollar.) (Hint: Maugarite will receive raises for 24 years.)

(b) What amount must be on deposit at the end of 15 years to ensure that all benefits will be paid?

(Round to the nearest dollar.)

(c) What is the amount of each annual deposit Maugarite must make to the retirement plan?