Suppose an employer wishes to provide an employee with $1,000 to pay for medical benefits when the

Question:

Suppose an employer wishes to provide an employee with $1,000 to pay for medical benefits when the employee retires in 25 years through a sweetened pension plan payment. The retiree’s expected tax rate in retirement is 20%, the employer’s current tax rate is 35%, and the pension fund earns 12% per year on its investments. How much will the employer need to contribute to the pension plan today to provide the $1,000 after tax to the retiree in 25 years?
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Taxes And Business Strategy A Planning Approach

ISBN: 9780132752671

5th Edition

Authors: Myron Scholes, Mark Wolfson, Merle Erickson, Michelle Hanlon

Question Posted: