Great Lakes Inc. has an unfunded pension liability of $300 million that must be paid in 18 years. The financial analyst wants to discount this liability back to present for valuation purposes. The appropriate discount rate is 8%. What is the present value of this liability?

If you have the following data, please calculate the future values in each of the cases. (using

This is the present value for Great Lakes Inc. when you use an 8% rate of discount spread over 18 years. Divide the $300,000,000 by 1, plus add the 8% discount. The total is 0.9259. When multiplied by the future value, we get $148.741.039.43.

The Present Value calculation is used to calculate how much must be invested now to achieve the return desired after a certain amount of time. Calculations are made to account for variables like inflation, and potential risks which could affect future investment returns. This gives investors an accurate estimation of the returns they will receive from their investments.

Having an understanding of how Present Value calculations work is essential for any financial analyst so that they can make informed decisions about where best to allocate funds within their organization’s budget while still ensuring they will reach their goals over time. Great Lakes Inc. would have to invest $148 million today to ensure that they will be able to pay off the pension liabilities in 18 years.