Sachs Brands’ defined benefit pension plan specifies annual retirement benefits equal to: 1.6% * service years * final year’s salary, payable at the end of each year. Angela Davenport was hired by...

Sachs Brands’ defined benefit pension plan specifies annual retirement benefits equal to: 1.6% * service

years * final year’s salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning

of 2002 and is expected to retire at the end of 2036 after 35 years’ service. Her retirement is expected to

span 18 years. Davenport’s salary is $90,000 at the end of 2016 and the company’s actuary projects her salary to

be $240,000 at retirement. The actuary’s discount rate is 7%.

Required:

1. What is the company’s projected benefit obligation at the beginning of 2016 (after 14 years’ service) with

respect to Davenport?

2. Estimate by the projected benefits approach the portion of Davenport’s annual retirement payments attributable

to 2016 service.

3. What is the company’s service cost for 2016 with respect to Davenport?

4. What is the company’s interest cost for 2016 with respect to Davenport?

5. Combine your answers to requirements 1, 3, and 4 to determine the company’s projected benefit obligation at

the end of 2016 (after 15 years’ service) with respect to Davenport.