QUESTION 4 - Tax Suppose you will retire in 9 years. Throughout your life you will face a tax rate of 31% and earn an after-tax rate of return of 8% on your investments. Your company's pension plan earns a 12% return, and the company itself earns a 10% after-tax return on its own projects. The company faces a current tax rate of 34% and will face a 40% rate in year 9. 3(a): How much in deferred compensation (D) would the company have to pay you in year 9 to make you indifferent between future Select $148.61 $199.90 $137.93 None of the available options are correct. compensation and a $100 bonus now? [Select] 3(b): How much of a contribution to your pension plan (P) would the company have to make to make you indifferent between pension benefits in 9 years and a $100 bonus now? [Select] [Select] $72.09 $49.74 $81.04 None of the available options are correct. 3(c): What is the present value of the after-tax cost of each form of compensation (current bonus of $100, deferred compensation of D*, and pension plan contribution of P) to the company, using a discount rate of 10%? Assume that company contributes P into the pension immediately. ILOT Select] $66 $65 $69 $100 None of the available choices are correct . Current Bonus: Select D': [Select) [ Select] $42.63 $50.87 None of the available options are correct. $120 . P: [Select] [Select] $47.58 $72.09 None of the available options are correct. $32.83 QUESTION 4 - Tax Suppose you will retire in 9 years. Throughout your life you will face a tax rate of 31% and earn an after-tax rate of return of 8% on your investments. Your company's pension plan earns a 12% return, and the company itself earns a 10% after-tax return on its own projects. The company faces a current tax rate of 34% and will face a 40% rate in year 9. 3(a): How much in deferred compensation (D) would the company have to pay you in year 9 to make you indifferent between future Select $148.61 $199.90 $137.93 None of the available options are correct. compensation and a $100 bonus now? [Select] 3(b): How much of a contribution to your pension plan (P) would the company have to make to make you indifferent between pension benefits in 9 years and a $100 bonus now? [Select] [Select] $72.09 $49.74 $81.04 None of the available options are correct. 3(c): What is the present value of the after-tax cost of each form of compensation (current bonus of $100, deferred compensation of D*, and pension plan contribution of P) to the company, using a discount rate of 10%? Assume that company contributes P into the pension immediately. ILOT Select] $66 $65 $69 $100 None of the available choices are correct . Current Bonus: Select D': [Select) [ Select] $42.63 $50.87 None of the available options are correct. $120 . P: [Select] [Select] $47.58 $72.09 None of the available options are correct. $32.83
