In many a defined contribution pension plan the employer

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In many a defined contribution pension plan, the employer provides a fixed percentage contribution to the employee"s retirement. Let us assume that you must contribute $4,000 per annum beginning next year, growing annually with the inflation rate of 2%/year. What is this individual"s pension cost to you of hiring a 25-year old, who will stay with the company for 35 years? Assume a discount rate of 8% per year. NOTE: You need the growing annuity formula 3.28, which you should look up.

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