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Build-A-Bear is a corporation, that, according to its business description in its financial statements, is a specialty retailer of plush animals and related products." According to a recent financial statement, it has 373 corporately-managed locations operated primarily in leased spaces in malls. Essentially, a customer is able to enter the store and build a teddy bear to the customer's specifications, including stuffing the bear. In foreign countries, the stores are run through franchises. According to the footnotes of a recently issued set of financial statements, Build-A-Bear offers certain employees a Deferred Compensation Plan as a benefit to certain management employees. You will not need to refer to Build-A-Bear's financial statements to complete the following computationsit is just used as a basis for setting up the scenarios. Think of this deferred compensation plan as similar to an athlete playing for a professional team that chooses to take a lower pay package currently in exchange for receiving compensation after her/his professional athletic years are over. Given this scenario of deferred compensation for officers, assume the following facts (fictional, not included in the footnotes). Assume that for the CEO, a deferred compensation plan has been arranged whereby the CEO's current compensation package will be reduced by $600,000 this year and each of the next four years (a total of 5 years) in exchange for deferred compensation to be paid for the next 10 years after the CEO ceases to be the CEO of Build-A-Bear. The following scenarios are independent of each other. 1. Assume that the corporation invests $50,000 at the end of each month for five years, at an annual interest rate of 9%, compounded monthly. At the end of five years, how much will be available for deferred compensation for the CEO? 2. Ignore your computation from #1 above. Assume that at the termination date, Build-A-Bear agrees to pay the former CEO $75,000 per month for five years. Payments will begin 30 days (one month) after the CEO's last day of work. Build-A-Bear's interest rate at that point in time is 8% annually. How much money would Build-A-Bear have to have on hand on the last day of the CEO's employment in order to make these monthly payments? 3. Ignore your computations and answers for #s 1 and 2 above. Assume that instead of monthly payments, Build-A-Bear has agreed to invest $500,000 of deferred compensation at the beginning of this year, at an annual interest rate of 7%, compounded semi-annually. The CEO will receive the deferred compensation investment plus all interest earned as a retirement bonus. How much will the CEO receive eight years from now when she retires? 4. Ignore your computations and answers for #'s 1, 2, and 3 above. Assume that the CEO is to receive a retirement bonus in 10 years of $3,000,000. How much must Build-A-Bear invest today to be able to pay the bonus in 10 years (assuming an annual interest rate of 6.5%, compounded quarterly)

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