Seiko's current salary is $127,500. Her marginal tax rate is 32 percent, and she fancies European...

 

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Seiko's current salary is $127,500. Her marginal tax rate is 32 percent, and she fancies European sports cars. She purchases a new auto each year. Seiko is currently a manager for Idaho Office Supply. Her friend, knowing of her interest in sports cars, tells her about a manager position at the local BMW and Porsche dealer. The new position pays $110,800 per year, but it allows employees to purchase one new car per year at a discount of $24,300. This discount qualifies as a nontaxable fringe benefit. In an effort to keep Seiko as an employee, Idaho Office Supply offers her a $17,100 raise. Answer the following questions about this analysis. b-1. Financially, which offer is better for Seiko on an after-tax basis? b-2. By how much is the offer better for Seiko on an after tax basis? (Assume that Seiko is going to purchase the new car whether she switches jobs or not.) Seiko's current salary is $127,500. Her marginal tax rate is 32 percent, and she fancies European sports cars. She purchases a new auto each year. Seiko is currently a manager for Idaho Office Supply. Her friend, knowing of her interest in sports cars, tells her about a manager position at the local BMW and Porsche dealer. The new position pays $110,800 per year, but it allows employees to purchase one new car per year at a discount of $24,300. This discount qualifies as a nontaxable fringe benefit. In an effort to keep Seiko as an employee, Idaho Office Supply offers her a $17,100 raise. Answer the following questions about this analysis. b-1. Financially, which offer is better for Seiko on an after-tax basis? b-2. By how much is the offer better for Seiko on an after tax basis? (Assume that Seiko is going to purchase the new car whether she switches jobs or not.)

Answer rating: 100% (QA)

To compare the offers on an aftertax basis lets calculate the aftertax income for each scenario 1 BM... View the full answer