Question

The following information applies to the questions displayed below) Seiko's current salary is $130,000. Her marginal tax rate is 32 percent and she fancies European sports cars. She purchases a new auto each year. Seiko is currently a manager for Idaho Office Supply. 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, Idaho Office Supply offers her a $12,700 raise. Answer the following questions about this analysis b-1. Financially, which offer is better for Seiko on an after-tax basis? • Car dealer's offer Current employer's offer Both offers 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

Answer 1

b 1) Financially which offer is better for seiko on an after tax basis?

Answer : car dealers offer

b 2)Bu how muchis the offer better for seikoon an after tax basis

Answer: offer is better by $2872

Workings: after tax income of seiko at idaho office supply = ($130000+$12700)*68%

= $97036

After tax income at car dealership=$113100*68%+23000

=$99908

The car dealerships offer is better by $2872