Problem 13-66 (LO 13-3) (Algo)Skip to question [The following information applies to the questions displayed below.]XYZ Corporation has a deferred compensation plan under which it allows certain employees to defer up to 40 percent of their salary for five years. For purposes of this problem, ignore payroll taxes in your computations. (Use Table 1.)Note: Round your intermediate calculations and final answers to the nearest whole dollar amount. Problem 13-66 Part a (Algo)a. Assume XYZ has a marginal tax rate of 21 percent for the foreseeable future and earns an after-tax rate of return of 13 percent on its assets. Joel Johnson, XYZ's VP of finance, is attempting to determine what amount of deferred compensation XYZ should be willing to pay in five years that would make XYZ indifferent between paying the current salary of $19,600 and paying the deferred compensation. What amount of deferred compensation would accomplish this objective? Future Value of $1n1234567891011121314151617181920251.0%1.010001.020102.0%1.020001.040401.061211.082431.104081.030301.040601.051011.061521.072141.126161.148691.171661.082861.093691.104621.115671.126831.138091.195091.218991.243371.268241.293611.14947 1.319481.160971.172581.184301.196151.208111.220191.282431.345871.372791.400241.428251.456811.485951.640613.0%1.030001.060901.092731.125511.159271.194051.229873.75%1.037501.076411.116771.158651.202101.247181.293951.26677 1.342474.0%1.040001.081601.124861.169861.216651.265321.315931.368571.423311.480241.539451.601031.665071.304771.343921.384231.425761.468531.392811.445041.499231.555451.613781.51259 1.67430 1.731681.557971.604711.652851.702431.753511.806112.093781.737091.802231.869811.939932.012682.088151.800941.872981.947902.025822.106852.191122.665842.510174.25%1.042501.086811.133005.0%1.050001.102501.157636.0%1.060001.123601.191021.18115 1.21551 1.262481.23135 1.276281.28368 1.340101.33824 1.407101.395111.477461.45440 1.551331.51621 1.628891.58065 1.710341.64783 1.795861.71786 1.885651.79087 1.979931.86699 2.078931.94633 2.182872.029052.292022.11529 2.406622.20519 2.526952.29891 2.653302.830753.386357.0%1.070001.144901.225041.310801.402551.500731.605781.718191.838461.967152.104852.252192.409852.578532.759032.952162.69277 3.158822.85434 3.379933.02560 3.616533.20714 3.869684.29187 5.427431.338231.418521.503631.593851.689481.790851.898302.012202.132932.260902.396562.540358.0%1.080001.166401.259711.360491.469331.586871.713821.850931.999002.158922.331642.518172.719622.937193.172173.425943.700023.996024.315704.660966.848489.0%1.090001.188101.295031.411581.538621.677101.828041.992562.171892.367362.580432.812663.065803.341733.642483.970314.327634.717125.141665.604418.6230810.0%12.0%13.0%14.0%15.0%20.0%25.0%1.100001.12000 1.13000 1.14000 1.15000 1.20000 1.250001.210001.25440 1.27690 1.29960 1.32250 1.44000 1.562501.331001.40493 1.44290 1.48154 1.52088 1.72800 1.953131.464101.57352 1.63047 1.68896 1.74901 2.07360 2.441411.610511.76234 1.84244 1.92541 2.01136 2.48832 3.051761.771561.97382 2.08195 2.19497 2.31306 2.98598 3.814701.948722.21068 2.35261 2.50227 2.66002 3.58318 4.768372.143592.47596 2.65844 2.85259 3.05902 4.29982 5.960462.357952.77308 3.00404 3.25195 3.51788 5.15978 7.450582.593743.10585 3.39457 3.70722 4.04556 6.19174 9.313232.853123.47855 3.83586 4.22623 4.65239 7.43008 11.641533.138433.89598 4.33452 4.81790 5.35025 8.91610 14.551923.452274.36349 4.89801 5.492416.15279 10.69932 18.189893.797504.88711 5.53475 6.26135 7.07571 12.83918 22.737374.177255.47357 6.25427 7.137948.13706 15.40702 28.421714.594976.13039 7.06733 8.13725 9.35762 18.48843 35.527145.054476.86604 7.98608 9.27646 10.76126 22.18611 44.408925.559927.68997 9.02427 10.57517 12.37545 26.62333 55.511156.115918.61276 10.19742 12.05569 14.23177 31.94800 69.388946.727509.64629 11.52309 13.74349 16.36654 38.33760 86.7361710.83471 13.58546 17.00006 21.23054 26.46192 32.91895 95.39622 264.6978011.0%1.110001.232101.367631.518071.685061.870412.076162.304542.558042.839423.151763.498453.883284.310444.784595.310895.895096.543557.263348.06231

Deferred compensation refers to the part of the salary taht is to be paid to an employee later,…

Answered: XYZ Corporation has a deferred…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem 13-66 (LO 13-3) (Algo)

Skip to question

[The following information applies to the questions displayed below.]

XYZ Corporation has a deferred compensation plan under which it allows certain employees to defer up to 40 percent of their salary for five years. For purposes of this problem, ignore payroll taxes in your computations. (Use Table 1.)

Note: Round your intermediate calculations and final answers to the nearest whole dollar amount.

Problem 13-66 Part a (Algo)

a. Assume XYZ has a marginal tax rate of 21 percent for the foreseeable future and earns an after-tax rate of return of 13 percent on its assets. Joel Johnson, XYZ's VP of finance, is attempting to determine what amount of deferred compensation XYZ should be willing to pay in five years that would make XYZ indifferent between paying the current salary of $19,600 and paying the deferred compensation. What amount of deferred compensation would accomplish this objective?

Future Value of $1
n
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
25
1.0%
1.01000
1.02010
2.0%
1.02000
1.04040
1.06121
1.08243
1.10408
1.03030
1.04060
1.05101
1.06152
1.07214
1.12616
1.14869
1.17166
1.08286
1.09369
1.10462
1.11567
1.12683
1.13809
1.19509
1.21899
1.24337
1.26824
1.29361
1.14947 1.31948
1.16097
1.17258
1.18430
1.19615
1.20811
1.22019
1.28243
1.34587
1.37279
1.40024
1.42825
1.45681
1.48595
1.64061
3.0%
1.03000
1.06090
1.09273
1.12551
1.15927
1.19405
1.22987
3.75%
1.03750
1.07641
1.11677
1.15865
1.20210
1.24718
1.29395
1.26677 1.34247
4.0%
1.04000
1.08160
1.12486
1.16986
1.21665
1.26532
1.31593
1.36857
1.42331
1.48024
1.53945
1.60103
1.66507
1.30477
1.34392
1.38423
1.42576
1.46853
1.39281
1.44504
1.49923
1.55545
1.61378
1.51259 1.67430 1.73168
1.55797
1.60471
1.65285
1.70243
1.75351
1.80611
2.09378
1.73709
1.80223
1.86981
1.93993
2.01268
2.08815
1.80094
1.87298
1.94790
2.02582
2.10685
2.19112
2.66584
2.51017
4.25%
1.04250
1.08681
1.13300
5.0%
1.05000
1.10250
1.15763
6.0%
1.06000
1.12360
1.19102
1.18115 1.21551 1.26248
1.23135 1.27628
1.28368 1.34010
1.33824 1.40710
1.39511
1.47746
1.45440 1.55133
1.51621 1.62889
1.58065 1.71034
1.64783 1.79586
1.71786 1.88565
1.79087 1.97993
1.86699 2.07893
1.94633 2.18287
2.02905
2.29202
2.11529 2.40662
2.20519 2.52695
2.29891 2.65330
2.83075
3.38635
7.0%
1.07000
1.14490
1.22504
1.31080
1.40255
1.50073
1.60578
1.71819
1.83846
1.96715
2.10485
2.25219
2.40985
2.57853
2.75903
2.95216
2.69277 3.15882
2.85434 3.37993
3.02560 3.61653
3.20714 3.86968
4.29187 5.42743
1.33823
1.41852
1.50363
1.59385
1.68948
1.79085
1.89830
2.01220
2.13293
2.26090
2.39656
2.54035
8.0%
1.08000
1.16640
1.25971
1.36049
1.46933
1.58687
1.71382
1.85093
1.99900
2.15892
2.33164
2.51817
2.71962
2.93719
3.17217
3.42594
3.70002
3.99602
4.31570
4.66096
6.84848
9.0%
1.09000
1.18810
1.29503
1.41158
1.53862
1.67710
1.82804
1.99256
2.17189
2.36736
2.58043
2.81266
3.06580
3.34173
3.64248
3.97031
4.32763
4.71712
5.14166
5.60441
8.62308
10.0%
12.0%
13.0%
14.0%
15.0%
20.0%
25.0%
1.10000
1.12000 1.13000 1.14000 1.15000 1.20000 1.25000
1.21000
1.25440 1.27690 1.29960 1.32250 1.44000 1.56250
1.33100
1.40493 1.44290 1.48154 1.52088 1.72800 1.95313
1.46410
1.57352 1.63047 1.68896 1.74901 2.07360 2.44141
1.61051
1.76234 1.84244 1.92541 2.01136 2.48832 3.05176
1.77156
1.97382 2.08195 2.19497 2.31306 2.98598 3.81470
1.94872
2.21068 2.35261 2.50227 2.66002 3.58318 4.76837
2.14359
2.47596 2.65844 2.85259 3.05902 4.29982 5.96046
2.35795
2.77308 3.00404 3.25195 3.51788 5.15978 7.45058
2.59374
3.10585 3.39457 3.70722 4.04556 6.19174 9.31323
2.85312
3.47855 3.83586 4.22623 4.65239 7.43008 11.64153
3.13843
3.89598 4.33452 4.81790 5.35025 8.91610 14.55192
3.45227
4.36349 4.89801 5.49241
6.15279 10.69932 18.18989
3.79750
4.88711 5.53475 6.26135 7.07571 12.83918 22.73737
4.17725
5.47357 6.25427 7.13794
8.13706 15.40702 28.42171
4.59497
6.13039 7.06733 8.13725 9.35762 18.48843 35.52714
5.05447
6.86604 7.98608 9.27646 10.76126 22.18611 44.40892
5.55992
7.68997 9.02427 10.57517 12.37545 26.62333 55.51115
6.11591
8.61276 10.19742 12.05569 14.23177 31.94800 69.38894
6.72750
9.64629 11.52309 13.74349 16.36654 38.33760 86.73617
10.83471 13.58546 17.00006 21.23054 26.46192 32.91895 95.39622 264.69780
11.0%
1.11000
1.23210
1.36763
1.51807
1.68506
1.87041
2.07616
2.30454
2.55804
2.83942
3.15176
3.49845
3.88328
4.31044
4.78459
5.31089
5.89509
6.54355
7.26334
8.06231

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