Answer:
Jill, age 35
a. Jill should choose the second compensation package.
b. She stands to benefit $6,991 in after-tax dollars by choosing this second compensation package instead of the first package.
c. If the first package offers $100,000 and other benefits and costs are the same:
Jill should choose the first compensation package.
d. She stands to benefit $191 in after-tax dollars by choosing this package.
Explanation:
a) Data and Calculations:
Job offers:
First package: Second package:
Annual salary = $90,000 $80,000
Parking fee (3,500) 3,840 (free parking)
Life insurance (1,470) 1,470
Free flight benefits (5,000) 5,000
Net benefits $80,030 $90,310
Tax (32%) 25,610 28,899
After-tax income $54,420 $61,411
Difference $6,991 ($61,411 - $54,420)
b) If the first package offers $100,000 and other benefits and costs are the same:
First package: Second package:
Annual salary = $100,000 $80,000
Parking fee (3,500) 3,840 (free parking)
Life insurance (1,470) 1,470
Free flight benefits (5,000) 5,000
Net benefits $90,030 $90,310
Tax (32%) 28,810 28,899
After-tax income $61,220 $61,411
Difference $191 ($61,220 - $61,411)
