Rodney, a cash-basis taxpayer, owes $50,000 in tax-deductible consulting fees for his business. Assume that it is December 28th and that Rodney can avoid any finance charges if he pays the accounting fees by January 10th. Rodney's tax rate this year is 28% and his after-tax rate of return is 8%. What tax rate next year will make Rodney indifferent between paying the $50,000 this year or next year? 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 7 Year 5 .822 .784 .747 .713 .681 .650 .621 .593 .567 Year 6 .790 .746 .705 .666 .630 .596 .564 .535 .507 9 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 7 Year 13 .601 .530 .469 .415 .368 .326 .290 .258 .229 Year 14 .577 .505 442 .388 .340 .299 .263 .232 .205 9 Year 15 .555 .481 417 .362 .315 .275 .239 .209 .183