Posted: July 15th, 2022

Compute the net present value of the after-tax cash flow for Melinda

Compute the net present value of the after-tax cash flow for Melinda

Melinda has been provided two competing employment contracts for the subsequent two years. Argus Company can pay her a $75,000 wage in each years 1 and a couple of. Dynamic Company can pay Melinda a $100,000 wage in yr 1 and a $49,000 wage in yr 2. Melinda expects to be in the 25 p.c marginal tax bracket in yr 1 and in the 33 p.c marginal tax bracket in yr 2 (because of a big quantity of revenue from new rental properties). She doesn’t anticipate both supply to alter her marginal tax bracket for both yr. Each Argus Company and Dynamic Company anticipate their marginal tax brackets to stay at 34 p.c over the two-year interval and anticipate that employment tax charges will stay the identical.

a. Compute the net present value of the after-tax cash flow for Melinda and after-tax price for Argus and Dynamic for every of the proposed employment contracts utilizing a 6 p.c low cost charge.

b. Which various is healthier for Melinda and which is healthier from the company’s perspective?

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