Reference no: EM132948727

Question - In the current year, Jill, age 35, received a job offer with two alternative compensation packages to choose from. The first package offers her $90,000 annual salary with no qualified fringe benefits and requires her to pay $3,500 a year for parking and to purchase life insurance at a cost of $1,000. The second package offers $80,000 annual salary, employer-provided health insurance, annual free parking (worth $320 per month), $200,000 of life insurance (purchasing on her own would have been $1,000 annually), and free flight benefits (she estimates that it will save her $5,000 per year). If Jill chooses the first package, she will purchase the health and life insurance benefits herself at a cost of $1,000 annually after taxes and spend another $5,000 in flights while traveling. Assume her marginal tax rate is 32 percent.

Required -

a1. Which compensation package should she choose?

a2. How much would she benefit in after-tax dollars by choosing this compensation package instead of the alternative package?

b1. Assume the first package offers $100,000 salary with no qualified benefits instead of $90,000 salary and the other benefits and costs are the same. Which compensation package should she choose?

b2. How much would she benefit in after-tax dollars by choosing this package?