Problem 3-38 (LO 3-2, LO 3-3) Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $32.000 bill from her accountant for consulting services related to her small business. Isabel can pay the $32,000 bill anytime before January 30 of next year without penalty. Assume her marginal tax rate is 40 percent this year and next year, and that she can earn an after-tax rate of return of 6 percent on her Investments. a. What is the after-tax cost if Isabel pays the $32,000 bill In December? After-tax cost b. What is the after-tax cost if Isabel pays the $32,000 bill in January? Use Exhibit 3.1. (Round your answer to the nearest whole dollar amount.) After-tax cost C. Based on requirements a and b. should Isabel pay the $32,000 bill in December or January? December January .712 EXHIBIT 3-1 Present Value of a Single Payment at Various Annual Rates of Return 4% 5% 6% 7% 8% 9% 10% 11% 12% Yearl | 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 Year 4 .855 .823 .792 .763 .735.708 .683.659636 Year 5 .822 .784 .747 .713 681 .650 .621 .593 Year 6 .790 .746 .705 | .666 .630 596 .564 535 507 Year 7 .760 .711 .665 .623 583 547 513 482 452 Year 8 1.731 .677 .627582 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 Year 12 .625 557 .497 444 397 356 319 .286 Year 13 .601 530 .469415 368 326 290 258 Year 14 577 505 .442 388 340 299 263 232 205 Year 15 555 .481 .417 362 315 275 239 209 .183 .287