You are the CFO of a HappyLife, Inc. Your company has 40 employees now, each earning a salary of $40,000/year. Employee salaries grow at 4% per year. Starting from next year (year=1), and every second year thereafter, 8 employees will retire, and no new employees are recruited. Your company has in place a pension plan that entitles retired workers to an annual pension which is equal to their annual salary at the moment of retirement. Life expectancy is 20 years after retirement, and the annual pension is paid at year-end. The return on investment is 10% per year. What is the total value of your pension liabilities as of now? Hint: The total value of your pension liabilities will be the sum of the PV of pension liability of each retirement cohort. There are versions of this question on chegg but there seems to be a problem with them compounding the annual salary when it states in the question that the pension is equal to their annual salary at retirement.

There are versions of this question on here but there they do not look accurate. The question states that a workers salary is equal to their annual salary the day they retired. The excel files they posted show that they are adding growth rate to the annual salary causing it to become higher