Solved: Taxation-pay or postpone expenses, Accounting Basics

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Taxation-pay or postpone expenses

Problem:

Crib Corporation, a cash-basis corporation, has $50,000 of expenses it could pay this year or it could postpone payment until next year. What is the present value effect of postponing the payment, using a 6 percent discount rate, if its current marginal tax rate is 34 percent but its marginal tax rate is expected to be 39 percent next year? How would your answer change if the next year's tax rate is expected to be 25 percent?

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