Donna Everitt Item Set

CFA Level III
#1

In question 3, it’s asked about the amount by which her current liquidity requirements would be exceeded.

They mention that Marjorie salary (150,000) equals her current living expenses. But since they don’t mention if the salary is before or after taxes, I assume it is before taxes (this is also confirmed by the calculation they do on question 5 where they do deduct taxes).

So the cash need would be = 90,000 (after tax salary) - 150,000 (living expenses) = -60,000 and would add this to the liquidity requirements

Then liquidity requirements = 2,000,000 (donation) + 217,943 (education fund) + 60,000 (cash needs).

But in the calculations for her liquidity requirements the income taxes are not taken into account in the solution provided.

I don’t understand this…Can someone please explain?

#2

same question

#3

I think there’s an error in that question. In all of the previous AM exams I’ve seen, if the questions states that current salary = living expenses the salary is after-tax (2008 Q1, 2004 Q2). Don’t read too much into this one…CFAI will make it perfectly clear on the actual exam.