1. Using the facts from the previous problem, how would your answer change if Isabel's after-tax rate of return were 8 percent?
2. Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December he performed $20,000 of legal services for a client. Manny typically requires his clients to pay his bills immediately upon receipt. Assume Manny's marginal tax rate is 40 percent this year and next year, and that he can earn an after-tax rate of return of 12 percent on his investments. Should Manny send his client the bill in December or January?
3. Using the facts from the previous problem, how would your answer change if Manny's after-tax rate of return were 8 percent?