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

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, Inc. 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 only $116,800 per year, but it allows employees to purchase one new car per year at a discount of $16,700. This discount qualifies as a nontaxable fringe benefit. In an effort to keep Seiko as an employee, Idaho Office Supply, Inc. offers her a $10,900 raise. Answer the following questions about this analysis.

Required information

a. What is the annual after-tax cost to Idaho Office Supply, Inc. if it provides Seiko with the $10,900 increase in salary? (Ignore payroll

taxes.)

After-tax cost