Question
Required information [The following information applies to the questions displayed below.] GMC Corporation has a deferred compensation plan under which it allows certain employees to
Required information
[The following information applies to the questions displayed below.]
GMC Corporation has a deferred compensation plan under which it allows certain employees to defer up to 40 percent of their salary for five years. For purposes of this problem, ignore payroll taxes in your computations. (Use Table 1.) (Round your intermediate calculations and final answers to the nearest whole dollar amount.)
b. Assume Jules, an GMC employee, has the option of participating in GMCs deferred compensation plan. Jules marginal tax rate is 37 percent and she expects the rate to remain constant over the next five years. Julie is trying to decide how much deferred compensation she will need to receive from GMC in five years to make her indifferent between receiving the current salary of $13,200 and receiving the deferred compensation payment. If Jules takes the salary, she will invest it in a taxable corporate bond paying interest at 7 percent annually (after taxes). What amount of deferred compensation would accomplish this objective?
Deferred Compensation __________________
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