What salary would seiko need to receive from her current

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Reference no: EM13598780

Seiko's currently has salary of $130,000, and she fancies European sports cars. She purchases a new auto each year. Seiko is currently a manager for an office equipment company. 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 $113,100 per year, but it allows employees to purchase one new car per year at a discount of $23,000. This discount qualifies as a nontaxable fringe benefit. In an effort to keep Seiko as an employee, her current employer offers her a $12,700 raise. Answer the following questions about this analysis (ignore FICA taxes in your analyses). Assume that Seiko's marginal tax rate is 30%.

A. What is the annual after-tax cost to her current employer (office equipment company that has a 35 percent marginal tax rate) to provide Seiko with the $12,700 increase in salary?
After-tax cost $

B.1 Financially, which offer is better for Seiko on an after-tax basis.. Answer is (Car dealer's offer)

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 her current employer to make her financially indifferent (after taxes) between receiving additional salary from her current employer and accepting a position at the auto dealership?
Salary received $

Reference no: EM13598780

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