1. Refer to the individual rate schedules in Appendix C.

Required:

1. What are the tax liability, the marginal tax rate, and the average tax rate for a married couple filing jointly with $63,900 taxable income?
2. What are the tax liability, the marginal tax rate, and the average tax rate for a single individual with $193,800 taxable income?
3. What are the tax liability, the marginal tax rate, and the average tax rate for a head of household with $458,300 taxable income?

2. French Corporation wishes to hire Leslie as a consultant to design a comprehensive staff training program. The project is expected to take one year, and the parties have agreed to a tentative price of $77,000. French Corporation has proposed payment of one-half of the fee now, with the remainder paid in one year when the project is complete. Use Appendix A and Appendix B.

Required:

1. a. If Leslie expects her marginal tax rate to be 15 percent this year and 25 percent next year, calculate the after-tax net present value of this contract to Leslie, using a 6 percent discount rate.
2. b. French Corporation expects its marginal tax rate to be 21 percent both years. Calculate the net present value of Frenchs after-tax cost to enter into this contract using a 6 percent discount rate.
3. c-1. Given that Leslie expects her tax rate to increase next year, she would prefer to receive more of the income from the project up front. Consider an alternative proposal under which French pays Leslie $54,000 this year, and $21,000 in one year when the contract is complete. Calculate the after-tax benefit of this counterproposal to Leslie and the after-tax cost to French.
4. c-2. Are both parties better off under this alternative than under the original plan?