rate of interest and discount rate, Financial Accounting

This is partly taken from a court case where one of my colleagues was a witness. Suppose that an employee is terminated without cause and that she sues the company for compensation.

-   Her wage used to be 20 000$ a year at the time of termination, and was set to grow at 5% a year.

-   Suppose we use the rate of interest as the discount rate, at 3%.

-   She still had 8 years to work there, before retirement.

-   They gave her severance pay of 5000$

-   At retirement, she would have been owed a pension equal to the best year in terms of pay (here, the last year, since the salary grows every year - so, for this one, use the wage rate you calculate at the end of the 8 year period). Let's assume she would have been projected to receive the pension for 10 years (note that the pension level does not increase at all any of these years)

How much should the company compensate her, assuming that they are found to be at fault?

Here again, outline all the steps of your reasoning. Grades will be awarded for the method as well as the answer.

Grading: This assignment is worth 10% of the grade. You will get 6 assignments throughout the semester, worth collectively 50% of the grade. You may submit all 6 and I will take the best five grade.

Posted Date: 3/21/2013 6:27:21 AM | Location : United States







Related Discussions:- rate of interest and discount rate, Assignment Help, Ask Question on rate of interest and discount rate, Get Answer, Expert's Help, rate of interest and discount rate Discussions

Write discussion on rate of interest and discount rate
Your posts are moderated
Related Questions
Can you help me balance my account number out

On 1 January 2008, a young artist called Michelangelo signed a contract with a charity named Art Angels, which supports young artists to do large projects. The agreement requires M

ACCOUNTS UNDER TRUSTEE (a) Authorised investments The investments which trustees are permitted to hold may be specifically stated in the will or deed constituting the se

Financial statement analysis involves the application of analytical tools and techniques to the financial data to get information that is useful in decision-making. Foundation o

Q. Probability of Success in Application for Debt Finance? I have to advise you that there are signs of overtrading in our recent financial statements and our company is approa

a. Create a worksheet in your excel file and name it "Part A Q2". In column A to E set up general journal and input the necessary journal entries to record the transactions and eve

Effect of Winding-up Order The consequences of a winding-up order are: 1) Any disposition of the company's property and any transfer of shares is void, unless the court otherwis

what is the implication of applying accounting concept wrongly

Day Corporation purchased a patent on January 1, 2012 for $360,000. The patent had a useful life of 10 years at that date. In January of 2013, Day successfully defends the patent a

Consider an economy with three states which occur with probability (0.2, 0.4, 0.4). Suppose a firm has a project which generates the state dependent cash flows (100, 200, 200) at t