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Nasty Industries is closing down an outmoded factory and throwing all of its workers out on the street. Nastys CEO is enraged to learn that
Nasty Industries is closing down an outmoded factory and throwing all of its workers out on the street. Nastys CEO is enraged to learn that the firm must continue to pay for workers health insurance for 4 years. The cost per worker next year will be $2400 per year, but the inflation rate is 4%, and health costs have been increasing at 3 percentage points faster than inflation. What is the present value of the obligation? The nominal discount rate is 10% and company does not pay taxes.
Nasty Industries is closing down an outmoded factory and throwing all of its workers out on the street. Nastys CEO is enraged to learn that the firm must continue to pay for workers health insurance for 4 years. The cost per worker next year will be $2400 per year, but the inflation rate is 4%, and health costs have been increasing at 3 percentage points faster than inflation. What is the present value of the obligation? The nominal discount rate is 10% and company does not pay taxes.
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