Seikos current salary is $106,000. Her marginal tax rate is 32 percent, and she fancies European sports cars. She purchases a new auto each year. Seiko is currently a manager for Idaho Office Supply. Her friend, knowing of her interest in sports cars, tells her about a manager position at the local BMW and Porsche dealer. The new position pays only $91,100 per year, but it allows employees to purchase one new car per year at a discount of $24,900. This discount qualifies as a nontaxable fringe benefit. In an effort to keep Seiko as an employee, Idaho Office Supply offers her a $15,900 raise. Answer the following questions about this analysis

a. What is the annual after-tax cost to Idaho Office Supply if it provides Seiko with the $15,900 increase in salary? (Ignore payroll taxes.)

b-1. Financially, which offer is better for Seiko on an after-tax basis?

• Car dealer's offer

• Current employer's offer

• Both offers

b-2. By how much is the offer better for Seiko on an after tax basis (Assume that Seiko is going to purchase the new car whether she switches jobs or not.)