Req A Req B Req C1 Req C2 Req D1 Req D2 Assuming an 8 percent discount rate for both Firm B and Ms. Ali, compute the NPV of Ms. Ali's after-tax cash flow from the employment contract and Firm B's after-tax cost of the employment contract. Note: Deductions and Cash Outflows should be entered with a minus sign. Round discount factor(s) to 3 decimal places, all other intermediate calculations and final answers to the nearest whole dollar amount. Enter tax rate in two decimals and not in percentage. Ms. Ali Before-tax salary/income Marginal tax rate Tax on income Before-tax Cashflow Tax After-tax cash flow Discount factor (8%) Present value NPV of salary received by Ms. Ali Firm B Before-tax Deduction Marginal Tax Rate Tax savings Before-tax Cash flow Tax savings After-tax Cash flow Discount factor (8%) Present value NPV of salary cost to Firm B Year 0 Year 1 Year 2 < Prev 1 of 2 Next > Show less ▲ Check my work Firm B wants to hire Ms. Ali to manage its advertising department. The firm offered Ms. Ali a three-year employment contract under which it will pay her an $104,500 annual salary in years 0, 1, and 2. Ms. Ali's projected tax rate is 25 percent in year O and a 40 percent rate in years 1 and 2. Firm B's tax rate for the three-year period is 35 percent. Use Appendix A and Appendix B. Required: a. Assuming an 8 percent discount rate for both Firm B and Ms. Ali, compute the NPV of Ms. Ali's after-tax cash flow from the employment contract and Firm B's after-tax cost of the employment contract. b. To reduce her tax cost, Ms. Ali requests that the salary payment for year O be increased to $144,500 and the salary payments for years 1 and 2 be reduced to $84,500. How would this revision in the timing of the payments change your NPV computation for both parties? c1. Firm B responds to Ms. Ali's request with a counterproposal. Firm B will pay Ms. Ali $144,500 in year O but only $79,500 in years 1 and 2. Compute the NPV of Firm B's after-tax cost under this proposal. c2. From the firm's perspective, is this proposal superior to its original offer ($104,500 annually for three years)? d1. Firm B responds to Ms. Ali's request with a counterproposal. It will pay her $144,500 in year 0 but only $79,500 in years 1 and 2. Compute the NPV of Ms. Ali's after-tax cash flow. d2. Should Ms. Ali accept the original offer or the counterproposal? Complete this question by entering your answers in the tabs below. Req A Req B Req C1 Req C2 Req D1 Req D2 Firm B responds to Ms. Ali's request with a counterproposal. Firm B will pay Ms. Ali $144,500 in year 0 but only $79,500 in years 1 and 2. Compute the NPV of Firm B's after-tax cost under this proposal. Note: Deductions and Cash Outflows should be entered with a minus sign. Round discount factor(s) to 3 decimal places, all other intermediate calculations and final answers to the nearest whole dollar amount. Enter tax rate in two decimals and not in percentage. Before-tax Deduction Marginal tax rate Tax savings Year 0 Year 1 Year 2 < Prev 1 of 2 Next > Show less▲ Check my work
Req A Req B Req C1 Req C2 Req D1 Req D2 Assuming an 8 percent discount rate for both Firm B and Ms. Ali, compute the NPV of Ms. Ali's after-tax cash flow from the employment contract and Firm B's after-tax cost of the employment contract. Note: Deductions and Cash Outflows should be entered with a minus sign. Round discount factor(s) to 3 decimal places, all other intermediate calculations and final answers to the nearest whole dollar amount. Enter tax rate in two decimals and not in percentage. Ms. Ali Before-tax salary/income Marginal tax rate Tax on income Before-tax Cashflow Tax After-tax cash flow Discount factor (8%) Present value NPV of salary received by Ms. Ali Firm B Before-tax Deduction Marginal Tax Rate Tax savings Before-tax Cash flow Tax savings After-tax Cash flow Discount factor (8%) Present value NPV of salary cost to Firm B Year 0 Year 1 Year 2 < Prev 1 of 2 Next > Show less ▲ Check my work Firm B wants to hire Ms. Ali to manage its advertising department. The firm offered Ms. Ali a three-year employment contract under which it will pay her an $104,500 annual salary in years 0, 1, and 2. Ms. Ali's projected tax rate is 25 percent in year O and a 40 percent rate in years 1 and 2. Firm B's tax rate for the three-year period is 35 percent. Use Appendix A and Appendix B. Required: a. Assuming an 8 percent discount rate for both Firm B and Ms. Ali, compute the NPV of Ms. Ali's after-tax cash flow from the employment contract and Firm B's after-tax cost of the employment contract. b. To reduce her tax cost, Ms. Ali requests that the salary payment for year O be increased to $144,500 and the salary payments for years 1 and 2 be reduced to $84,500. How would this revision in the timing of the payments change your NPV computation for both parties? c1. Firm B responds to Ms. Ali's request with a counterproposal. Firm B will pay Ms. Ali $144,500 in year O but only $79,500 in years 1 and 2. Compute the NPV of Firm B's after-tax cost under this proposal. c2. From the firm's perspective, is this proposal superior to its original offer ($104,500 annually for three years)? d1. Firm B responds to Ms. Ali's request with a counterproposal. It will pay her $144,500 in year 0 but only $79,500 in years 1 and 2. Compute the NPV of Ms. Ali's after-tax cash flow. d2. Should Ms. Ali accept the original offer or the counterproposal? Complete this question by entering your answers in the tabs below. Req A Req B Req C1 Req C2 Req D1 Req D2 Firm B responds to Ms. Ali's request with a counterproposal. Firm B will pay Ms. Ali $144,500 in year 0 but only $79,500 in years 1 and 2. Compute the NPV of Firm B's after-tax cost under this proposal. Note: Deductions and Cash Outflows should be entered with a minus sign. Round discount factor(s) to 3 decimal places, all other intermediate calculations and final answers to the nearest whole dollar amount. Enter tax rate in two decimals and not in percentage. Before-tax Deduction Marginal tax rate Tax savings Year 0 Year 1 Year 2 < Prev 1 of 2 Next > Show less▲ Check my work
Chapter5: Gross Income: Exclusions
Section: Chapter Questions
Problem 47P
Related questions
Question
Please provide correct answers. i will upvote.
![Req A
Req B
Req C1
Req C2
Req D1
Req D2
Assuming an 8 percent discount rate for both Firm B and Ms. Ali, compute the NPV of Ms. Ali's after-tax cash flow from the
employment contract and Firm B's after-tax cost of the employment contract.
Note: Deductions and Cash Outflows should be entered with a minus sign. Round discount factor(s) to 3 decimal places, all
other intermediate calculations and final answers to the nearest whole dollar amount. Enter tax rate in two decimals and not
in percentage.
Ms. Ali
Before-tax salary/income
Marginal tax rate
Tax on income
Before-tax Cashflow
Tax
After-tax cash flow
Discount factor (8%)
Present value
NPV of salary received by Ms. Ali
Firm B
Before-tax Deduction
Marginal Tax Rate
Tax savings
Before-tax Cash flow
Tax savings
After-tax Cash flow
Discount factor (8%)
Present value
NPV of salary cost to Firm B
Year 0
Year 1
Year 2
< Prev
1 of 2
Next >
Show less ▲
Check my work](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc8514667-bf86-4079-a5fb-967fac7b38d7%2F958d54cd-bec9-4572-8f2e-9cc977a0074b%2Fi17676_processed.png&w=3840&q=75)
Transcribed Image Text:Req A
Req B
Req C1
Req C2
Req D1
Req D2
Assuming an 8 percent discount rate for both Firm B and Ms. Ali, compute the NPV of Ms. Ali's after-tax cash flow from the
employment contract and Firm B's after-tax cost of the employment contract.
Note: Deductions and Cash Outflows should be entered with a minus sign. Round discount factor(s) to 3 decimal places, all
other intermediate calculations and final answers to the nearest whole dollar amount. Enter tax rate in two decimals and not
in percentage.
Ms. Ali
Before-tax salary/income
Marginal tax rate
Tax on income
Before-tax Cashflow
Tax
After-tax cash flow
Discount factor (8%)
Present value
NPV of salary received by Ms. Ali
Firm B
Before-tax Deduction
Marginal Tax Rate
Tax savings
Before-tax Cash flow
Tax savings
After-tax Cash flow
Discount factor (8%)
Present value
NPV of salary cost to Firm B
Year 0
Year 1
Year 2
< Prev
1 of 2
Next >
Show less ▲
Check my work
![Firm B wants to hire Ms. Ali to manage its advertising department. The firm offered Ms. Ali a three-year employment contract under
which it will pay her an $104,500 annual salary in years 0, 1, and 2. Ms. Ali's projected tax rate is 25 percent in year O and a 40 percent
rate in years 1 and 2. Firm B's tax rate for the three-year period is 35 percent. Use Appendix A and Appendix B.
Required:
a. Assuming an 8 percent discount rate for both Firm B and Ms. Ali, compute the NPV of Ms. Ali's after-tax cash flow from the
employment contract and Firm B's after-tax cost of the employment contract.
b. To reduce her tax cost, Ms. Ali requests that the salary payment for year O be increased to $144,500 and the salary payments for
years 1 and 2 be reduced to $84,500. How would this revision in the timing of the payments change your NPV computation for
both parties?
c1. Firm B responds to Ms. Ali's request with a counterproposal. Firm B will pay Ms. Ali $144,500 in year O but only $79,500 in years 1
and 2. Compute the NPV of Firm B's after-tax cost under this proposal.
c2. From the firm's perspective, is this proposal superior to its original offer ($104,500 annually for three years)?
d1. Firm B responds to Ms. Ali's request with a counterproposal. It will pay her $144,500 in year 0 but only $79,500 in years 1 and 2.
Compute the NPV of Ms. Ali's after-tax cash flow.
d2. Should Ms. Ali accept the original offer or the counterproposal?
Complete this question by entering your answers in the tabs below.
Req A
Req B
Req C1
Req C2
Req D1
Req D2
Firm B responds to Ms. Ali's request with a counterproposal. Firm B will pay Ms. Ali $144,500 in year 0 but only $79,500 in
years 1 and 2. Compute the NPV of Firm B's after-tax cost under this proposal.
Note: Deductions and Cash Outflows should be entered with a minus sign. Round discount factor(s) to 3 decimal places, all
other intermediate calculations and final answers to the nearest whole dollar amount. Enter tax rate in two decimals and not
in percentage.
Before-tax Deduction
Marginal tax rate
Tax savings
Year 0
Year 1
Year 2
< Prev
1 of 2
Next >
Show less▲
Check my work](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc8514667-bf86-4079-a5fb-967fac7b38d7%2F958d54cd-bec9-4572-8f2e-9cc977a0074b%2F824n9t8_processed.png&w=3840&q=75)
Transcribed Image Text:Firm B wants to hire Ms. Ali to manage its advertising department. The firm offered Ms. Ali a three-year employment contract under
which it will pay her an $104,500 annual salary in years 0, 1, and 2. Ms. Ali's projected tax rate is 25 percent in year O and a 40 percent
rate in years 1 and 2. Firm B's tax rate for the three-year period is 35 percent. Use Appendix A and Appendix B.
Required:
a. Assuming an 8 percent discount rate for both Firm B and Ms. Ali, compute the NPV of Ms. Ali's after-tax cash flow from the
employment contract and Firm B's after-tax cost of the employment contract.
b. To reduce her tax cost, Ms. Ali requests that the salary payment for year O be increased to $144,500 and the salary payments for
years 1 and 2 be reduced to $84,500. How would this revision in the timing of the payments change your NPV computation for
both parties?
c1. Firm B responds to Ms. Ali's request with a counterproposal. Firm B will pay Ms. Ali $144,500 in year O but only $79,500 in years 1
and 2. Compute the NPV of Firm B's after-tax cost under this proposal.
c2. From the firm's perspective, is this proposal superior to its original offer ($104,500 annually for three years)?
d1. Firm B responds to Ms. Ali's request with a counterproposal. It will pay her $144,500 in year 0 but only $79,500 in years 1 and 2.
Compute the NPV of Ms. Ali's after-tax cash flow.
d2. Should Ms. Ali accept the original offer or the counterproposal?
Complete this question by entering your answers in the tabs below.
Req A
Req B
Req C1
Req C2
Req D1
Req D2
Firm B responds to Ms. Ali's request with a counterproposal. Firm B will pay Ms. Ali $144,500 in year 0 but only $79,500 in
years 1 and 2. Compute the NPV of Firm B's after-tax cost under this proposal.
Note: Deductions and Cash Outflows should be entered with a minus sign. Round discount factor(s) to 3 decimal places, all
other intermediate calculations and final answers to the nearest whole dollar amount. Enter tax rate in two decimals and not
in percentage.
Before-tax Deduction
Marginal tax rate
Tax savings
Year 0
Year 1
Year 2
< Prev
1 of 2
Next >
Show less▲
Check my work
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![Individual Income Taxes](https://www.bartleby.com/isbn_cover_images/9780357109731/9780357109731_smallCoverImage.gif)
Individual Income Taxes
Accounting
ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT