Carey operates Crib as a sole proprietorship, a cash-basis company, that has $50,000 of expenses it could pay this year or it could postpone payment until next year. What is the effect of postponing the payment, using a 6 percent discount rate, if Carey's current marginal tax rate is 22 percent but is expected to be 32 percent next year? How would your answer change if the next year's tax rate is expected to be 10 percent? (The present value of $1 at 6% is .943. Do not consider self-employment tax.

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The Answer of Carey operates Crib as a sole proprietorship, a cash-basis company, that has $50,000 of expenses it could pay this year or it could postpone payment until next year. What is the effect of postponing the payment, using a 6 percent discount rate, if Carey's current marginal tax rate is 22 percent but is expected to be 32 percent next year? How would your answer change if the next year's tax rate is expected to be 10 percent? (The present value of $1 at 6% is .943. Do not consider self-employment tax.

Carey Operates Crib as a Sole Proprietorship, a Cash-Basis Company