1. Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $20,000 bill from her accountant for consulting services related to her small business. Reese can pay the $20,000 bill any time before January 30 of next year without penalty. Assume Reeses marginal tax rate is 32 percent this year and will be 37 percent next year, and that she can earn an after-tax rate of return of 6 percent on her investments. When should she pay the $20,000 billthis year or next?

2. Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $20,000 bill from her accountant for consulting services related to her small business. Reese can pay the $20,000 bill any time before January 30 of next year without penalty. Assume Reeses marginal tax rate is 32 percent this year and will be 24 percent next year, and that she can earn an after-tax rate of return of 6 percent on her investments. When should she pay the $20,000 billthis year or next?

3. Assume Rafael can earn an 7 percent after-tax rate of return. He can receive $1,000 today or $1,500 in five years. What is the present value of the $1,500 payment due in five years?

4. Assume Ellina earns a 9 percent after-tax rate of return, and that she owes a friend $1,200. She can pay the friend $1,200 today or $1,750 in four years. What is the present value of the $1,750 payment due in four years?