Final answer:
The correct answer is (A) $164.4 million. The Colorado Copper Company's projected benefit obligation at December 31, 2016 is $164.4 million after adding the service cost and interest, and subtracting retiree benefits paid.
Step-by-step explanation:
The Colorado Copper Company's projected benefit obligation at the end of 2016 is calculated by taking the projected benefit obligation at the beginning of the year, adding the service cost for the year, applying the discount rate to the beginning obligation amount to account for interest accrual, and subtracting any retiree benefits paid during the year.
Starting with a projected benefit obligation of $144 million at the beginning of 2016, we add the service cost for 2016, which is $36 million. Then we calculate the interest that would accrue on the beginning obligation ($144 million) at the discount rate of 10%, which amounts to $14.4 million ($144 million × 10%). From this subtotal ($144 million + $36 million + $14.4 million), we deduct the retiree benefits paid, which are $30 million. This leaves us with a total projected benefit obligation of $164.4 million at the end of 2016.