Firm B wants to hire Mrs. X to manage its advertising department. The firm offered Mrs. X a three-year employment contract under which it will pay her an $100,000 annual salary in years 0, 1, and 2. Mrs. X projects that her salary will be taxed at a 25 percent rate in year 0 and a 40 percent rate in years 1 and 2. Firm B's tax rate for the three-year period is 30 percent. Use Appendix A and Appendix B. a. Assuming an 8 percent discount rate for both Firm B and Mrs. X, compute the NPV of Mrs. X's after- tax cash flow from the employment contract and Firm B's after-tax cost of the employment contract. Req A Reg B Req ci Reg C2 Reg D1 Req D2 Assuming an 8 percent discount rate for both Firm B and Mrs. X, compute the NPV of Mrs. X's after-tax cash flow from the employment contract and Firm B's after-tax cost of the employment contract. (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.) Show less Year 0 Year 1 Year 2 Mrs. X 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 Mrs. X 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 Appendix A. Present Value of $1 Periods 3% 7% 9% .971 943 915 .888 .962 .925 889 935 873 .816 .763 713 .666 .917 .842 .772 .708 .650 .596 .863 6% 943 .890 .840 .792 747 .705 .665 .627 .592 .558 .527 .497 .469 .623 .837 .813 .789 .766 .744 .722 .701 .681 .661 .642 .623 .605 .587 .570 .554 547 .855 822 .790 .760 .731 .703 .676 .650 .625 .601 .577 .555 .534 .513 .952 .907 .864 .823 .784 .746 .711 .677 .645 .614 .585 .557 .530 -505 .481 .458 .436 .416 396 .377 8% 926 857 .794 .735 .681 .630 .583 .540 .500 .463 429 .397 .368 .340 315 292 270 250 232 215 .582 .544 .508 .475 .444 .415 388 .362 339 .317 .296 .277 258 .502 .460 .422 .388 356 .326 299 275 252 231 212 .194 .442 417 394 371 .350 .331 .312 .494 .475 .456 178 Periods 10% 11% 12% 20% 893 .901 .812 .731 .659 .593 .535 .482 434 .391 .352 .797 .712 .636 .567 .507 452 .404 .361 14% .877 .769 .675 .592 .519 456 .400 .351 13% .885 .783 .693 .613 543 .480 425 .376 .333 .295 .261 308 PONOVOU AWN- .909 .826 .751 .683 .621 .564 .513 ,467 424 386 350 319 .290 .263 .239 218 .198 .180 . 164 .149 15% .870 .756 .658 -572 .497 .432 .376 .327 284 .247 .215 .187 .163 .141 .123 . 107 093 .081 .070 .061 317 .833 .694 .579 .482 402 .335 279 233 .194 .162 .135 .112 .093 .078 .065 .054 .045 .038 .031 .026 .231 .270 237 208 .182 .160 .140 229 205 286 258 232 209 .188 . 170 .153 .138 204 .181 .160 .183 . 141 .123 .125 . 108 .163 .146 .130 .116 .104 .111 098 .087 095 .083 .124 .073 Appendix B Present Value of Annuity of $1 Periods 3% 8% 9% 971 1.913 2.829 3.717 4.580 5.417 6.230 7.020 7.786 8.530 9.253 9.954 10.635 11.296 11.938 12.561 13.166 13.754 14.324 14.877 49% 4% .962 1.886 2.775 3.630 4.452 5.242 6.002 6.733 7.435 8.111 8.760 9.385 9.986 10.563 11.118 11.652 12.166 12.659 13.134 13.590 5% .952 1.859 2.723 3.546 4.329 5.076 5.786 6.463 7.108 7.722 8.306 8.863 9.394 9.899 10.380 10.838 11.274 11.690 12.085 12.462 6% 943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 7.887 8.384 8.853 9.295 9.712 10.106 10.477 10.828 11.158 11.470 7% 935 1.808 2.624 3.387 4.100 4.767 5.389 5.971 6.515 7.024 7.499 7.943 8.358 8.745 9. 108 9.447 9.763 10.059 10.336 10.594 .926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 7.139 7.536 7.904 8.244 8.559 8.851 9.122 9.372 9.604 9.818 917 1.759 2.531 3.240 3.890 4.486 5.033 5.535 5.995 6.418 6.805 7.161 7.487 7.786 8.061 8.313 8.544 8.756 8.950 20 9.129 Periods 10% 11% 12% 13% 14% 20% .909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 6.495 6.814 7.103 7.367 7.606 7.824 8.022 8.201 8.365 8.514 .901 1.713 2.444 3.102 3.696 4.231 4.712 5.146 5.537 5.889 6.207 6.492 6.750 6.982 7.191 7.379 7.549 7.702 7.839 7.963 .893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 5.938 6.194 6.424 6.628 6.811 6.974 7.120 7.250 7.366 7.469 .885 1.668 2.361 2.974 3.517 3.998 4.423 4.799 5.132 5.426 5.687 5.918 6.122 6.302 6.462 6.604 6.729 6.840 6.938 7.025 .877 1.647 2.322 2.914 3.433 3.889 4.288 4.639 4.946 5.216 5.453 5.660 5.842 6.002 6.142 6.265 6.373 6.467 6.550 6.623 15% .870 1.626 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5.019 5.234 5,421 5.583 5.724 5.847 5.954 6.047 6.128 6.198 6.259 .833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 4.327 4.439 4.533 4.611 4.675 4.730 4.775 4.812 4.843 4.870