Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Required Informetion [The following information applies to the questions displayed below] XYZ Corporetion has a deferred compensation plan under which it allows certain employees to

image text in transcribed
image text in transcribed
Required Informetion [The following information applies to the questions displayed below] XYZ Corporetion 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. (Round your Intermedlate calculations and final answers to the nearest whole dollar emount.) . Assume XYZ has a marginal tax rate of 21 percent for the foreseeable future and earns an after-tax rate of return of 8 percent on its assets. JoelJohnson, 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 $10,000 and paying the deferred compensation. What amount of deferred compensation would accomplish this objective? Deferred compensation 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 40 percent of their salary for five years. For purposes of this problem, ignore payroll taxes in your computations. (Round your Intermedlate calculations and final answers to the nearest whole doller amount.) b. Assume Jule, 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 vears, Julle 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 $10,000 and receiving the deferred compensation payment. If Julie takes the salary, she will invest it in a taxable corporate bond paying interest at 5 percent annually (after taxes). What amount of deferred compensation would accomplish this objective? Deferred compensaton

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing A Quality System For The Defense Industry

Authors: Charles B. Robinson

1st Edition

0873890787, 978-0873890786

More Books

Students also viewed these Accounting questions

Question

8. Demonstrate aspects of assessing group performance

Answered: 1 week ago