Evaluate monicos marginal tax rate next year

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Monico Corporation, a cash basis calendar-year taxpayer, is in the 25 percent marginal tax bracket this year. If it bills its customers at the beginning of December, it will receive $5,000 of income prior to year-end. If it bills its customers at the end of December, it will not receive the $5,000 until January of next year.

a. If it expects its marginal tax rate to remain 25 percent next year, when should it bill its customers? Use a 6 percent discount factor to explain your answer.

b. How would your answer change if Monico's marginal tax rate next year is only 15 percent? Explain.

c. How would your answer change if Monico's marginal tax rate next year is 34 percent? Explain.

Reference no: EM13518295

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