Question - Qunitana Pena expects to receive a $500,000 cash benefit when she retires five years from today. Ms. Pena's employer has offered an early retirement incentive be agreeing to pay her $300,000 today if she agrees to retire immediately. Ms. Pena desires to earn a rate of return of 12%.
a. Assuming that the retirement benefit is the only consideration in making the retirement decision should Ms. Pena accept her employers offer?
b. Identify the factors that cause the present value of the retirement benefit to be less than $500,000.