What is the minimum accrual rate, Corporate Finance

Question:

Car Maker Ltd is a multinational. In one of the countries where it is present, current legislation makes it compulsory for companies to pay a gratuity lump sum at retirement equivalent to 150% of the monthly salary per complete year of service. For companies which have a pension scheme in place, they can deduct 100 times the monthly pension off the gratuity lump sum payment. Car Maker Ltd wants to put in place a final salary DB scheme to fund in advance this gratuity benefit

a) What is the minimum accrual rate that will ensure that Car Maker will have no liability at retirement in respect of the gratuity?

b) How will your answer to (a) above change if Car Maker Ltd defines pensionable salary as the average over the last 5 years instead of using final salary? Explain

c) On a purely cost basis, is it in the interest of Car Maker to set up a DB scheme with the minimum accrual rate to fund for the gratuity lump sum assuming that retirement age is 65 and life expectancy at retirement is 12 years? Explain

d) How would your answer to (c) above change if all employees of Car Maker Ltd were females instead of males? Explain

Posted Date: 12/4/2013 2:24:52 AM | Location : United States







Related Discussions:- What is the minimum accrual rate, Assignment Help, Ask Question on What is the minimum accrual rate, Get Answer, Expert's Help, What is the minimum accrual rate Discussions

Write discussion on What is the minimum accrual rate
Your posts are moderated
Related Questions
what will be impact on the operating leverage of a firm if it proceeds for additional borrowings

In the apparel industry, three prominent developments contribute to the complexity of forecasting: shortening product life-cycles, increasing product variety, and globalization of

I need some ideas or topic for my 8-12 pages semester assignment. Further more tools to solve the assignment. I''m working in an engineering company (in a technical role).

To determine Henkel''s corporate beta, unlever (and relever) the ordinary least squares (OLS) market betas for each company in the European Household and Personal Care segment. Pri

Table gives the average MAPE, again for all SKUs with positive preview demand together (overall) and also per preview demand class. We remark that despite of the large differences

What do you think the future has in store in terms of white collar crime?Are there certain kinds of white collar crime discussed in this text that you believe will increase?Are the

project work on factor affecting capital structure.

Problem 1: (a) Will a corporation be morally responsible for its actions? (b) Why do corporations engage in social responsibilities, and what are the potential drawbacks?

Question: A. Explain in details two securities quoted at par and two securities quoted on a discount. B. Calculate the return on a deposit of £ 1,000,000 bearing an annual

Question 1: (a) What are the competing theories which have been put forward to explain the term structure of interest rates? Which theories do the evidence tend to support?