Roger Is a fiNish Carpenter Who Is in High Demand

question 368

Multiple Choice

Roger is a finish carpenter who is in high demand because of the outstanding quality of his work. The AB Construction Co. is trying to get an exclusive contract for his work for the next two years. As
An enticement, they are offering to pay him a lump sum today in exchange for his services for the
Next two years. Currently, Roger is prepaid on a monthly basis at a rate of $18,000 per month. What
Is the minimum contract amount that AB Construction can get Roger to consider if he refuses to
Take a pay cut? The applicable discount rate is 7.8%?

• A) $375,000
• B) $400,000
• C) $425,000
• D) $450,000
• E) $475,000

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Definitions:

Federal Income Tax Withholding

The amount of federal income tax withheld from an employee's paycheck, based on their earnings and tax filing status.

Net Pay

The amount of money remaining from an employee's gross pay after deductions like taxes, insurance premiums, and retirement contributions have been subtracted.

FICA Tax

A U.S. federal payroll (or employment) tax imposed on both employees and employers to fund Social Security and Medicare—federal programs that provide benefits for retirees, disabled people, and children of deceased workers.

Federal Income Tax

A tax levied by the government on the annual income of individuals, corporations, trusts, and other legal entities.