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The Federal tax code allows businesses but not individuals to deduct the cost of health insurance premiums from their taxable income. Consider a company named HeadBook that could either spend $5000 on an insurance policy for an employee named Vanessa or could increase her annual salary by $5000 instead. a. As far as the tax code is concerned, HeadBook will increase its expenses by $5000 in either case. If it pays for the policy, it incurs a $5000 health care expense. If it raises Vanessa's salary by $5000, it incurs $5000 of salary expense. If HeadBook is profitable and pays corporate profit taxes at a marginal 35 percent rate, by how much will HeadBook's tax liability be reduced in either case? The firm will pay $ less in taxes. b. Suppose that Vanessa pays personal income tax at a marginal 20 percent rate. If HeadBook increases her salary by $5000, how much of that increase will she have after paying taxes on that raise? $ If Vanessa can only devote what remains after paying taxes on the $5000 to purchasing health insurance, how much will she be able to spend on health insurance for herself? $ c. If HeadBook spends the $5000 on a health insurance policy for Vanessa instead of giving it to her as a raise, how many more dollars will HeadBook be able to spend on Vanessa's health insurance than if she had to purchase it herself after being given a $5000 raise and paying taxes on that raise? $ d. Would Vanessa prefer to have the raise or to have HeadBook purchase insurance for her? Vanessa would prefer to have HeadBook purchase insurance for her.Vanessa would prefer to have a raise in her annual salary. Would HeadBook have any profit motive for denying Vanessa her preference? e. Suppose the government changes the tax law so that individuals can now deduct the cost of health insurance from their personal incomes. If Vanessa gets the $5000 raise and then spends all of it on health insurance, will her tax liability change? How much will she be able to spend on health insurance? $ Will she now have a preference for HeadBook to buy insurance on her behalf?
The Following table shows the regression coefficient (B) and the t-statistics (T) for the variables influencing business traveler demand for hotel rooms (including hotel prices and attributes) from the study Business Traveler Demand for Hotel Rooms
Assume that two companies (C and D) are duopolists that produce identical products. Demand for the products is given by the following linear demand function: P = 600 - Q^c -Q^d where Q^c and Q^d are the quantities sold by the respective firms
Whenever John is singing, the sales revenue from concert tickets is $100,000 higher than if a regular singer is singing. If he doesn't become a singer, he can get a job that pays $50,000 at most. How much will he be paid in equilibrium How much of..
Assume the Widget Industry is composed of the following firms with associated market shares: firm Market Share A 35 B 20 C 10 D 7 E 3 The remaining market is served by about 100 small firms. What is the HHI for the Widget Industry
A monopoly sells music CDs. It has a constant marginal and average total cost of $20. It faces two groups of potential customers: honest and dishonest people. The dishonest and honest consumers' demand functions are the same,Qh = Qd = 120 - P.
One aspect of obtaining a college education is the prospect of improved future earnings in comparison to non-college graduates. Sharon Shay estimates that a college education has a $28,000 equivalent cost at graduation.
Determine algebraically the profit-maximizing outputs for the production and marketing divisions of the firm and the optimal transfer price for the intermediate product and the price of the final product.
The monthly wage rate is $3,000 per worker and the monthly rental rate for a machine is $6,000. Currently PowerGuns Co. employs 25 workers and 40 machines. Assume perfect divisibility of labor and machines. A. What is the current average product o..
Whay is the payback period of the following investment when a) i=0% and b) i=10%/ year Initial Cost ($) 1,000,000 Annual Cost ($) 100,000 Annual income ($) 300,000 salvage Value ($) 500,000 Max Life time: 10 years
What is the size of the sampling error in this case b. What is the probability that the average wait time would be less than 80 seconds c. What is the probability that the average wait time would be more than 109 seconds d. What is the probability..
1. The cross price elasticity of demand between goods X and Y is -3.5. If the price of X decreases by 7%, the quantity demanded of Y will ___. 2. What is the horizontal intercept of the budget line, given that M = $1,000, PX = $50, and PY = $40
Assume that when you graduate you will owe a total of $29,500 in student loans. Assume that the interest rate is 7.5%, compounded monthly, and that the entire amount must be repaid within 10 years. Determine what your minimum monthly payment will ..
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