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In the current year, Jill, age 35 , received a job offer with two alternative compensation packages to choose from. The first package offers her a $93,200 annual salary with no qualified fringe benefits, employer provided health insurance, and requires her to pay $5,100 a year for parking and to purchase life insurance at a cost of $2,600. The second package offers an $81,600 annual salary, employer-provided health insurance, annual free parking (worth $480 per month), $200,000 of life insurance (purchasing on her own would have been $2,600 annually), and free flight benefits (she estimates that it will save her $6,600 per year). If Jill chooses the first package, she will purchase the health and life insurance benefits herself at a cost of $2,600 annually after taxes and spend another $6,600 in flights while traveling. Assume her marginal tax rate is 32 percent. (Use Exhibit 12-8.) Required: a1. Which compensation package should she choose? a2. How much would she benefit in after-tax dollars by choosing this compensation package instead of the alternative package? b1. Assume the first package offers a $117,000 salary instead of a $93,200 salary, and the other benefits and costs are the same. Which compensation package should she choose? b2. How much would she benefit in after-tax dollars by choosing this package? EXHIBIT 12-8 Uniform Premiums for $1,000 of Group-Term Life Insurance Protection Table Summary: Chart shows cost per $1,000 of life insurance protection for one month per 5-year age bracket. Source: Reg. 1.793(d)(2)

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