Answered step by step
Verified Expert Solution
Question
1 Approved Answer
ControlBill sells professional services based on long - term contracts. He knows about the full - inclusion and one - year deferral rules for prepaid
ControlBill sells professional services based on longterm contracts. He knows about the fullinclusion and oneyear deferral rules for prepaid service income. He understands the value of tax deferral, but he also knows that bookkeeping using the fullinclusion rule is easier. He expects to receive a total of $ of prepaid service income, and these contracts average about months. He estimates that he earns of the prepaid amount in the year received. Bill's tax rate is and he has a aftertax discount rate.
What is the present value of the tax savings from using the oneyear deferral rule instead of the fullinclusion rule?
a$
b$
c $
d $
e $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started