Firm B wants to hire Ms$.$ Ali to manage its advertising department. The firm offered Ms$.$ Ali a three$-$year employment contract under

which it will pay her an $$99,000$ annual salary in years $0,1,$ and $2.$ Ms$.$ Ali's projected tax rate is $25$ percent in year $0$ and a $40$ percent

rate in years $1$ and $2.$ Firm B$\text{'}$s tax rate for the three$-$year period is $35$ percent. Use Appendix A and Appendix B$.$

Required:

a$.$ Assuming an $8$ percent discount rate for both Firm B and Ms$.$ Ali, compute the NPV of Ms$.$ Ali's after$-$tax cash flow from the

employment contract and Firm B$\text{'}$s after$-$tax cost of the employment contract.

b$.$ To reduce her tax cost, Ms$.$ Ali requests that the salary payment for year $0$ be increased to $$139,000$ and the salary payments for

years $1$ and $2$ be reduced to $$79,000.$ How would this revision in the timing of the payments change your NPV computation for

both parties?

c$1.$ Firm B responds to Ms$.$ Ali's request with a counterproposal. Firm B will pay Ms$.$ Ali $$139,000$ in year $0$ but only $$74,000$ in years $1$

and $2.$ Compute the NPV of Firm B$\text{'}$s after$-$tax cost under this proposal.

c$2.$ From the firm's perspective, is this proposal superior to its original offer $($ $$99,000$ annually for three years$)?$

d$1.$ Firm B responds to Ms$.$ Ali's request with a counterproposal. It will pay her $$139,000$ in year $0$ but only $$74,000$ in years $1$ and $2.$

Compute the NPV of Ms$.$ Ali's after$-$tax cash flow.

d$2.$ Should Ms$.$ Ali accept the original offer or the counterproposal?

Complete this question by entering your answers in the tabs below.

Req A

Req D$1$

Assuming an $8$ percent discount rate for both Firm B and Ms$.$ Ali, compute the NPV of Ms$.$ Ali's after$-$tax cash flow from the

employment contract and Firm B$\text{'}$s after$-$tax cost of the employment contract.

Note: 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.