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Tax Accounting for Kodax

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Kodax, a cash basis corporation is considering paying $50,000 of expenses at the end of this year rather than waiting until next year. Kodax marginal tax rate for the current year is 25 percent but it expects to be in the 34 percent marginal tax bracket next year. Kodax uses a 7 percent discount rate for evaluation purposes.

Should Kodax pay the expenses at the end of the current year?

See the attached file.

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This solution illustrates how to perform tax planning using discounted cash flows in an attached Excel file.

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