Imprudential, Inc., has an unfunded pension liability of $755 million that must be paid in 25 years. To

Imprudential, Inc., has an unfunded pension liability of $755 million that must be paid in 25 years. To assess the value of the firm’s stock, financial analysts want to discount this liability back to the present.

Required:

If the relevant discount rate is 8 percent, what is the present value of this liability? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Round your answer to 2 decimal places (e.g., 32.16).)

Present value

$

rev: 04-29-2011

Explanation:

To find the PV of a lump sum, we use:

PV = FV / (1 + r)t

PV = $755,000,000 / (1.08)25

PV = $110,243,518.21

Calculator Solution:

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

Enter

25

8%

$755,000,000

N

I/Y

PV

PMT

FV

Solve for

–$110,243,518.21