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 $60,000. 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 a. If Leslie expects her marginal tax rate to be 24 percent this year and 35 percent next year, calculate the after tax net present value of this contract to Leslie, using a 6 percent discount rate b. French Corporation expects its marginal tax rate to be 21 percent both years. Calculate the net present value of French's after-tax cost to enter into this contract using a 6 percent discount rate 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 $42,000 this year and $16,000 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 c-2. Are both parties better off under this alternative than under the original plan? 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 $42,000 this year, and $16,000 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 (Cash outflows and negative amounts should be indicated by a minus sign. Round discount factors to 3 decimal places. Round intermediate calculations and final answers to the nearest whole dollar amount.) Show less Value of restructured transaction to Leslie Year 0: Cash received Tax cost Net cash flow Year 1 Cash received Tax cost Net cash flow Discount factor (6%) Present value of year 1 cash flow NPV Cost of restructured transaction to French: Year 0: Cash paid Tax savings Net cash flow Year 1 Cash paid Tax savings Net cash flow Discount factor (6%) Present value of year 1 cash flow NPV Present Value of $1 Periods 962 925 889 855 822 952 943 890 840 792 935 926 943 857 735 630 823 763 708 650 863 6 705 665 627 592 558 527 497 469 623 582 583 8 789 500 463 676 650 625 508 475 722 701 585 557 530 505 388 397 368 326 388 362 623 605 587 292 252 350 475 232 258 Periods 10% 12% 15% 893 885 783 693 870 833 769 675 592 826 658 572 497 432 376 327 284 683 659 593 535 482 636 482 335 233 6 452 425 467 424 386 8 308 352 322 287 257 295 237 208 286 258 093 065 045 263 205 107 093 108 095 083 073 038 098 087 026 38691657127931505230 A- 9752840594814703 1. 2 3 3 4 5 5 5 6 6 7 77888889 1222333444444444444 5 8 6 2 8 3 7 1 4 7 0 2 4 5 7 8 9 0 1 12 -- . 1. 2 2 3 3 4 4 4 5 5 5 5 5 5 5 6 6 66 a 9 7 5 3 9 6 2 7 2 7 1592581368 1233455667778889999 5 g 4707915 358739 1234455677788999000 1223344455556666666 43 3 3 RES 272 21 202 360 88 4 3 5 2 1 4 2 58 70 f 1 3% 58695 998 23 199 2278 22 202 004 125 40 998 005 6% 95947146 91 -2. 3 4 4 5 6 6 7 7 8 8 9 9 0 0 0 1 1 1223344555566666667 3 369146891234 1233444555666667777 864061 -2. 3 4 5 5 6 7 7 8 8 9 9 0 0 1 1 2 2 2235105 en 3 6420741 7 41627158247913 1234566788990112233 6701585955437642154 99875420752962951738 1234567789901123344 1233445566677778888 12345678901234567890 12345678901234567890