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Three senior executives are renewing their employment contracts with Global Consulting Ltd., a public corporation. The corporation

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Three senior executives are renewing their employment contracts with Global Consulting Ltd., a public corporation. The corporation has provided each of them with the following alternative compensation plans for 2013 in addition to the $145,000 base salary each receives:
(a) A cash raise of $5,000 in 2013.
(b) A bonus of $5,500 payable in 2014.
(c) Use of the company condominium in Hawaii for two weeks, valued at $3,000.
(d) A stock option arrangement to purchase 1,000 shares of Global Consulting, a public company, this month (December 2012). Today's fair market value of the shares is $5, and the option price would be $3.50 per share. Management anticipates the share price in December 2013 will be $6.50.
Assume a marginal tax rate of 45%.

REQUIRED
Discuss the various alternatives and provide a recommendation to the senior executives.
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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a A cash raise would increase the taxes payable of the senior executives by 2250 or 5000 45 It is a good method of compensation if the executives are in need of cash flow Net cash is 2750 b The bonus ...View the full answer


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