Question
XYZ Corporation has a Deferred Compensation Plan under which it allows certain employees to defer up to 25% of their salary for 5 years. For
XYZ Corporation has a Deferred Compensation Plan under which it allows certain employees to defer up to 25% of their salary for 5 years. For purposes of this problem ignore payroll taxes in your computations use table one. Round your inner intermediate calculations and final answers to the nearest whole dollar amount. Assume XYZ has a marginal tax rate of 21% for the foreseeable future and earns an after tax rate of return of 16% on its assets. Joel Johnson XYZ is VP of Finance, is attempting to determine what amount is of deferred compensation XYZ should be willing to pay in 5 years that would make XYZ in different between paying the current salary of $13,800 and paying the Deferred Compensation. What amount of deferred compensation would accomplish this objective?
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