Sal, a calendar year taxpayer, uses the cash basis method of accounting for his sole proprietorship In late December he performed $50,000 of consulting services for a client Sal typically requires his clients to pay his bills immediately upon receipt Assume that Sal's marginal tax rate is 32 percent this year and 37 percent next year and that he can earn an after tax rate of return of 7 percent on his investments Should Sal send his client the bill in December or January 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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Sal, a calendar-year taxpayer, uses the cash-basis method of accounting for his sole proprietorship. In late December he performed $50,000 of consulting services for a

Sal, a calendar-year taxpayer, uses the cash-basis method of accounting for his sole proprietorship. In late December he performed $50,000 of consulting services for a client. Sal typically requires his clients to pay his bills immediately upon receipt. Assume that Sal's marginal tax rate is 32 percent this year and 37 percent next year and that he can earn an after-tax rate of return of 7 percent on his investments. Should Sal send his client the bill in December or January? 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