Sal, a calendar-year taxpayer, uses the cash-basis method of accounting for his sole proprietorship. In late December, he performed $60,000 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 12 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