In the current year, Jill, age 35, received a job offer with two alternative compensation packages to choose from. The first package offers her a $92,400 annual salary with no qualified fringe benefits, employer provided health insurance, and requires her to pay $4,700 a year for parking and to purchase life insurance at a cost of $2,200. The second package offers an $81,200 annual salary, employer-provided health insurance, annual free parking (worth $440 per month), $200,000 of life insurance (purchasing on her own would have been $2,200 annually), and free flight benefits (she estimates that it will save her $6,200 per year). If Jill chooses the first package, she will purchase the health and life insurance benefits herself at a cost of $2,200 annually after taxes and spend another $6,200 in flights while traveling, Assume her marginal tax rate is 32 percent. (Use Exhibit 12-8.) Required: a1. Which compensation package should she choose? a2. How much would she benefit in after-tax dollars by choosing this compensation package instead of the alternative package? b1. Assume the first package offers a $113,000 salary instead of a $92,400 salary, and the other benefits and costs are the same. Which compensation package should she choose? b2. How much would she benefit in after-tax dollars by choosing this package? EXHIBIT 12-8 Uniform Premiums for $1,000 of Group-Term Life Insurance Protection Table Summary: Chart shows cost per $1,000 of life insurance protection for one month per 5-year age bracket. .09 .10 5-Year Age Bracket Cost per $1,000 of Protection for One Month Under 25 $0.05 25 to 29 .06 30 to 34 .08 35 to 39 40 to 44 45 to 49 .15 50 to 54 .23 55 to 59 .43 60 to 64 .66 65 to 69 1.27 70 and above 2.06 Source: Reg. $1.79-3(d)(2). Complete this question by entering your answers in the tabs below. Req ai Req a2 Req b1 Req b2 How much would she benefit in after-tax dollars by choosing this compensation package instead of the alternative package (Round your intermediate computations to the nearest whole dollar amount.) After-tax benefit Complete this question by entering your answers in the tabs below. Req a1 Reg az Reqb1 Req b2 How much would she benefit in after-tax dollars by choosing this package? (Round your intermediate computations to the nearest whole dollar amount.) After-tax benefit In the current year, Jill, age 35, received a job offer with two alternative compensation packages to choose from. The first package offers her a $92,400 annual salary with no qualified fringe benefits, employer provided health insurance, and requires her to pay $4,700 a year for parking and to purchase life insurance at a cost of $2,200. The second package offers an $81,200 annual salary, employer-provided health insurance, annual free parking (worth $440 per month), $200,000 of life insurance (purchasing on her own would have been $2,200 annually), and free flight benefits (she estimates that it will save her $6,200 per year). If Jill chooses the first package, she will purchase the health and life insurance benefits herself at a cost of $2,200 annually after taxes and spend another $6,200 in flights while traveling, Assume her marginal tax rate is 32 percent. (Use Exhibit 12-8.) Required: a1. Which compensation package should she choose? a2. How much would she benefit in after-tax dollars by choosing this compensation package instead of the alternative package? b1. Assume the first package offers a $113,000 salary instead of a $92,400 salary, and the other benefits and costs are the same. Which compensation package should she choose? b2. How much would she benefit in after-tax dollars by choosing this package? EXHIBIT 12-8 Uniform Premiums for $1,000 of Group-Term Life Insurance Protection Table Summary: Chart shows cost per $1,000 of life insurance protection for one month per 5-year age bracket. .09 .10 5-Year Age Bracket Cost per $1,000 of Protection for One Month Under 25 $0.05 25 to 29 .06 30 to 34 .08 35 to 39 40 to 44 45 to 49 .15 50 to 54 .23 55 to 59 .43 60 to 64 .66 65 to 69 1.27 70 and above 2.06 Source: Reg. $1.79-3(d)(2). Complete this question by entering your answers in the tabs below. Req ai Req a2 Req b1 Req b2 How much would she benefit in after-tax dollars by choosing this compensation package instead of the alternative package (Round your intermediate computations to the nearest whole dollar amount.) After-tax benefit Complete this question by entering your answers in the tabs below. Req a1 Reg az Reqb1 Req b2 How much would she benefit in after-tax dollars by choosing this package? (Round your intermediate computations to the nearest whole dollar amount.) After-tax benefit
