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Seiko's current salary is $111,500. Her marginal tax rate is 32 percent, and she fancies European sports cars. She purchases a new auto each year.
Seiko's current salary is $111,500. 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 $100,300 per year, but it allows employees to purchase one new car per year at a discount of $18,500. This discount qualifies as a nontaxable fringe benefit. In an effort to keep Seiko as an employee, Idaho Office Supply offers her a $13,500 raise. Answer the following questions about this analysis. Problem 12-41 Part a (Algo) a. What is the annual after-tax cost to Idaho Office Supply if it provides Seiko with the $13,500 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) Offer is better by c. What salary would Seiko need to receive from Idaho Office Supply to make her financially indifferent (after taxes) between receiving additional salary from Idaho Office Supply and accepting a position at the auto dealership? (Round your intermediate computations to the nearest dollar amount.) Salary needed
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