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Joe Harry, a cash-basis taxpayer, owes $18,000 in tax-deductible accounting fees for his business. Assume that it is December 28 th and that Joe Harry

Joe Harry, a cash-basis taxpayer, owes $18,000 in tax-deductible accounting fees for his business. Assume that it is December 28th and that Joe Harry can avoid any finance charges if he pays the accounting fees by January 10th. Joe Harry's tax rate this year is 24 percent. His tax rate next year will be 32 percent. His after-tax rate of return is 6 percent. When should Joe Harry pay the $18,000 fees and why? Use Exhibit 3.1. (Round discount factor(s) to three decimal places.)

EXHIBIT 3-1 Present Value of a Single Payment at Various Annual Rates of Return

4%

5%

6%

7%

8%

9%

10%

11%

12%

Year 1

.962

.952

.943

.935

.926

.917

.909

.901

.893

Year 2

.925

.907

.890

.873

.857

.842

.826

.812

.797

Year 3

.889

.864

.840

.816

.794

.772

.751

.731

.712

Year 4

.855

.823

.792

.763

.735

.708

.683

.659

.636

Year 5

.822

.784

.747

.713

.681

.650

.621

.593

.567

Year 6

.790

.746

.705

.666

.630

.596

.564

.535

.507

Year 7

.760

.711

.665

.623

.583

.547

.513

.482

.452

Year 8

.731

.677

.627

.582

.540

.502

.467

.434

.404

Year 9

.703

.645

.592

.544

.500

.460

.424

.391

.361

Year 10

.676

.614

.558

.508

.463

.422

.386

.352

.322

Year 11

.650

.585

.527

.475

.429

.388

.350

.317

.287

Year 12

.625

.557

.497

.444

.397

.356

.319

.286

.257

Year 13

.601

.530

.469

.415

.368

.326

.290

.258

.229

Year 14

.577

.505

.442

.388

.340

.299

.263

.232

.205

Year 15

.555

.481

.417

.362

.315

.275

.239

.209

.183

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