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.

**Please show formulas for how you got the answers in the Excel file.

A B D E F G H 1 J L M M 1 Workforce 2 Life expectancy 3 Annual initial salary 4 Salary yearly growth 5 Annual return 6 40 20 40,000 4% 10% Salary of Each Retiree Retirees Cohort Pension Liability of Each Cohort at the Time of Retirement PV of Pension Liability of Each Cohort as of Now 41,600 8 0 44,995 8 0 0 1 1 2 2 3 4 5 6 7 a 9 A 0 a a 0 8 Total 40 Total Value of Pension Liabilities as of Now: 7 Year 7 8 9 10 11 12 13 14 15 18 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 38 37 38 39 40 41 s