In the current year, Jill, age 35, received a job offer with two alternative compensation packages to choose from. The first package offers her $91,400 annual salary with no qualified fringe benefits and requires her to pay $4,200 a year for parking and to purchase life insurance at a cost of $1,700. The second package offers $81,400 annual salary, employer-provided health insurance, annual free parking (worth $385 per month), $200,000 of life insurance (purchasing on her own would have been $1,700 annually), and free flight benefits (she estimates that it will save her $5,700 per year). If Jill chooses the first package, she will purchase the health and life insurance benefits herself at a cost of $5,700 and $ 1,700 respectively, annually after taxes and spend another $5,700 in flights while traveling. Assume her marginal tax rate is 32 percent. (Use Exhibit 12-8.)

Required:

a1. Which compensation package should she choose?

Answer: Package 2 offers $81,400 annual salary plus qualified fringe benefits like health and life insurance benefits, parking, flight tickets.radio button checked

a2. How much would she benefit in after-tax dollars by choosing this compensation package instead of the alternative package?

Answer: ?

b1. Assume the first package offers $100,000 salary with no qualified benefits instead of $91,400 salary and the other benefits and costs are the same. Which compensation package should she choose?

Answer: Package 2 offers $81,400 annual salary plus qualified fringe benefits like health and life insurance benefits, parking, flight tickets.radio button checked

b2. How much would she benefit in after-tax dollars by choosing this package?

Answer: ?