Nontax Issues to Consider When Evaluating Current Salary Versus Deferred

question 38

Multiple Choice

Nontax issues to consider when evaluating current salary versus deferred compensation include

• A)the employee may need the cash now.
• B)deferred compensation carries some risk.
• C)deferred compensation may,depending on the contract,lock the employee into continued employment.
• D)All of the above are issues to be considered.

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Definitions:

Discounted Cash Flow

A valuation method used to estimate the value of an investment based on its expected future cash flows, adjusting for the time value of money.

Net Present Value

The difference between the present value of cash inflows and outflows over a period of time, used in capital budgeting to assess profitability.

Discount Rate

The discount rate is the interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows.

Working Capital

Working capital is the difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of the business.