Rarely Prudent Inc has an unfunded pension liability of 225

Rarely Prudent, Inc. has an unfunded pension liability of $225 million that must be paid in 17 years. If the relevant discount rate is 8.5%, what is the present value of this liability?

Solution

present value of this liability=$225million*Present value of discounting factor(8.5%,17)

=$225,000,000/1.085^17

=$225,000,000*0.249858685

which is equal to

=$56,218,204.24(Approx)(or 56.22 mllion approx).