An Employee Has an Average Wage of $60,000 and They

question 73

Multiple Choice

An employee has an average wage of $60,000 and they have worked for the firm for 25 years.The defined benefit pension plan pays retirees 2.5% of the average wage times the years of service.The employee can expect to receive _______ per year upon retirement.

• A) $18,000
• B) $37,500
• C) $45,325
• D) $55,250

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Definitions:

Cost of Capital

The minimum return that an enterprise must earn on its investments for the value of the firm to remain unchanged, considered in project evaluations and pricing.

Equivalent Annual Annuity

A financial method used to evaluate projects with different lifespans by converting their values into equal annual payments.

Initial Outlay

The initial investment amount needed to fund a project or investment.

Cost of Capital

The rate of return that a company must earn on its project investments to maintain its market value and attract funds.