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This excerpt taken from the BBBY 8-K filed Nov 19, 2009. Illustration of Calculation of Lump Sum Value of Retirement Benefit
The Retirement Benefit is payable in the form of a lump sum equal to the present value of an annual amount equal to 50% of annual base salary rate on Separation from Service if paid over a period of 10 years in accordance with payroll practices, discounted using the Applicable Federal Rate for short-term Treasury obligations for the month in which the Separation from Service occurs.
Assumptions for Purposes of this Illustration Only:
Annual Base Salary Rate - $1,500,000 Applicable Federal Rate for short-term Treasury obligations (as published by the IRS) - .82% Frequency of Payments –semi-monthly Termination Date - July 1, 2013
50% of $1,500,000 x 10 years = $7,500,000 $7,500,000/240 (paid in semi-monthly installments) = $31,250 per installment
Lump Sum Present Value
Stream of payments of $31,250 Over 240 periods Discounted based on rate of .03417% per period (.82%/24) Lump Sum Present Value = $7,199,612
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