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Firm B wants to hire Ms. All to manage its advertising department. The firm offered Ms. All a three-year employment contract under which it will

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Firm B wants to hire Ms. All to manage its advertising department. The firm offered Ms. All a three-year employment contract under which it will pay her an $80,000 annual salary in years 0 1 and 2. Ms. All projects that her salary will be taxed at a 25 percent rate in year and a 40 percent rate in years 1 and 2 Firm B's tax rate for the three-year period is 34 percent. Use Appendix A and Appendix B. Required: a. Assuming an 8 percent discount rate for both Firm B and Ms. All, compute the NPV of Ms. All's after-tax cash flow from the employment contract and Firm B's after-tax cost of the employment contract. b. To reduce her tax cost, Ms. Ali requests that the salary payment for year o be increased to $140,000 and the salary payments for years 1 and 2 be reduced to $50,000. How would this revision in the timing of the payments change your NPV computation for both parties? C-1. Firm Bresponds to Ms. All's request with a counterproposal. It will pay her $140,000 in year O but only $45,000 in years 1 and 2. Compute the NPV of Firm B's after-tax cost under this proposal. c-2. From the firm's perspective, Is this proposal superior to its original offer ($80,000 annually for three years)? d-1. Firm Bresponds to Ms. All's request with a counterproposal. It will pay her $140,000 in year O but only $45,000 in years 1 and 2. Compute the NPV of Ms. All's after-tax cash flow. d-2. Should Ms. All accept the original offer or the counterproposal? Complete this question by entering your answers in the tabs below. Req A ReqB ReqC1 Reg C2 Reg D1 Reg D2 Assuming an 8 percent discount rate for both Firm B and Ms. All, compute the NPV of Ms. All'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 inal answers to the nearest whole dollar amount. Enter tax rate in two decimals and not in percentaga.) Show less Year o Yeart Year 2 Ms. All Before-tax salary income 80,000 $80,000 $80,000

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