What is the highest deferred compensation payment

Assignment Help Management Theories

Reference no: EM131457345

Question: Your employer is considering paying you deferred compensation in 5 years or a cash bonus of $1 million today. Here are the facts:

• Your tax rate today is 50%.

• Your tax rate in 5 years will be 35%.

• Your employer's tax rate today is 30%.

• Your employer's tax rate in 5 years will be 40%.

• Both you and your employer have an after-tax discount rate of 7%.

a. What is the highest deferred compensation payment (received 5 years from now) that your employer would be willing to pay?

b. What is the lowest deferred compensation payment (received 5 years from now) that you would settle for?

c. Can you and your employer get together and write a mutually beneficial deferred compensation contract? If so, describe the contract (amount).

Reference no: EM131457345

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