Required Information [The following information applies to the questions displayed below.] XYZ Corporation has a deferred compensation plan under which it allows certain employees to defer up to 30 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.) a. Assume XYZ has a marginal tax rate of 21 percent for the foreseeable future and earns an after-tax rate of return of 10 percent on its assets. Joel Johnson, XYZ's VP of finance, is attempting to determine what amount of deferred compensation XYZ should be willing to pay in five years that would make XYZ indifferent between paying the current salary of $17,400 and paying the deferred compensation. What amount of deferred compensation would accomplish this objective? Deferred compensation b. Assume Julie, an XYZ employee, has the option of participating in XYZ's deferred compensation plan. Julie's 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 XYZ in five years to make her indifferent between receiving the current salary of $17,400 and receiving the deferred compensation payment. If Julie takes the salary, she will invest it in a taxable corporate bond paying interest at 6 percent annually (after taxes). What amount of deferred compensation would accomplish this objective? Deferred compensation Future Value of $1 Periods 1.0% 2.0% 3.0% 3.75% 4.0% 4.25% 5.0% 6.0% 7.0% 1 1.01000 1.02000 1.03000 1.03750 1.04000 1.04250 1.05000 1.06000 1.07000 2 1.02010 1.04040 1.06090 1.07641 1.08160 1.08681 1.10250 1.12360 1.14490 3 1.03030 1.06121 1.09273 1.11677 1.12486 1.13300 1.15763 1.19102 1.22504 4 1.04060 1.08243 1.12551 1.15865 1.16986 1.18115 1.21551 1.26248 1.31080 5 1.05101 1.10408 1.15927 1.20210 1.21665 1.23135 1.27628 1.33823 1.40255 6 1.06152 1.12616 1.19405 1.24718 1.26532 1.28368 1.34010 1.41852 1.50073 7 1.07214 1.14869 1.22987 1.29395 1.31593 1.33824 1.40710 1.50363 1.60578 8 1.08286 1.17166 1.26677 1.34247 1.36857 1.39511 1.47746 1.59385 1.71819 9 1.09369 1.19509 1.30477 1.39281 1.42331 1.45440 1.55133 1.68948 1.83846 10 1.10462 1.21899 1.34392 1.44504 1.48024 1.51621 1.62889 1.79085 1.96715 11 1.11567 1.24337 1.38423 1.49923 1.53945 1.58065 1.71034 1.89830 2.10485 12 1.12683 1.26824 1.42576 1.55545 1.60103 1.64783 1.79586 2.01220 2.25219 13 1.13809 1.29361 1.46853 1.61378 1.66507 1.71786 1.88565 2.13293 2.40985 14 1.14947 1.31948 1.51259 1.67430 1.73168 1.79087 1.97993 2.26090 2.57853 15 1.16097 1.34587 1.55797 1.73709 1.80094 1.86699 2.07893 2.39656 2.75903 16 1.17258 1.37279 1.60471 1.80223 1.87298 1.94633 2.18287 2.54035 2.95216 17 1.18430 1.40024 1.65285 1.86981 1.94790 2.02905 2.29202 2.69277 3.15882 18 1.19615 1.42825 1.70243 1.93993 2.02582 2.11529 2.40662 2.85434 3.37993 19 1.20811 1.45681 1.75351 2.01268 2.10685 2.20519 2.52695 3.02560 3.61653 20 1.22019 1.48595 1.80611 2.08815 2.19112 2.29891 2.65330 3.20714 3.86968 25 1.28243 1.64061 2.09378 2.51017 2.66584 2.83075 3.38635 4.29187 5.42743 30 1.34785 1.81136 2.42726 3.01747 3.24340 3.48564 4.32194 5.74349 7.61226 Periods 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 20.0% 25.0% 1 1.08000 1.09000 1.10000 1.11000 1.12000 1.13000 1.14000 1.15000 1.20000 1.25000 2 1.16640 1.18810 1.21000 1.23210 1.25440 1.27690 1.29960 1.32250 1.44000 1.56250 3 1.25971 1.29503 1.33100 1.36763 1.40493 1.44290 1.48154 1.52088 1.72800 1.95313 4 1.36049 1.41158 1.46410 1.51807 1.57352 1.63047 1.68896 1.74901 2.07360 2.44141 5 1.46933 1.53862 1.61051 1.68506 1.76234 1.84244 1.92541 2.01136 2.48832 3.05176 6 1.58687 1.67710 1.77156 1.87041 1.97382 2.08195 2.19497 2.31306 2.98598 3.81470 7 1.71382 1.82804 1.94872 2.07616 2.21068 2.35261 2.50227 2.66002 3.58318 4.76837 8 1.85093 1.99256 2.14359 2.30454 2.47596 2.65844 2.85259 3.05902 4.29982 5.96046 9 1.99900 2.17189 2.35795 2.55804 2.77308 3.00404 3.25195 3.51788 5.15978 7.45058 10 2.15892 2.36736 2.59374 2.83942 3.10585 3.39457 3.70722 4.04556 6.19174 9.31323 11 2.33164 2.58043 2.85312 3.15176 3.47855 3.83586 4.22623 4.65239 7.43008 11.64153 12 2.51817 2.81266 3.13843 3.49845 3.89598 4.33452 4.81790 5.35025 8.91610 14.55192 13 2.71962 3.06580 3.45227 3.88328 4.36349 4.89801 5.49241 6.15279 10.69932 18.18989 14 2.93719 3.34173 3.79750 4.31044 4.88711 5.53475 6.26135 7.07571 12.83918 22.73737 15 3.17217 3.64248 4.17725 4.78459 5.47357 6.25427 7.13794 8.13706 15.40702 28.42171 16 3.42594 3.97031 4.59497 5.31089 6.13039 7.06733 8.13725 9.35762 18.48843 35.52714 17 3.70002 4.32763 5.05447 5.89509 6.86604 7.98608 9.27646 10.76126 22.18611 44.40892 18 3.99602 4.71712 5.55992 6.54355 7.68997 9.02427 10.57517 12.37545 26.62333 55.51115 19 4.31570 5.14166 6.11591 7.26334 8.61276 10.19742 12.05569 14.23177 31.94800 69.38894 20 4.66096 5.60441 6.72750 8.06231 9.64629 11.52309 13.74349 16.36654 38.33760 86.73617 25 6.84848 8.62308 10.83471 13.58546 17.00006 21.23054 26.46192 32.91895 95.39622 264.69780 30 10.06266 13.26768 17.44940 22.89230 29.95992 39.11590 50.95016 66.21177 237.37631 807.79357