Final answer:
MPW Corp. might use LIFO in times of rising prices to lower taxable income by increasing COGS, whereas it might use FIFO to report higher profits by having a lower COGS. Inventory valuation method choice is strategic, depending on financial, tax, and operational factors.
Step-by-step explanation:
In times of rising prices, a company like MPW Corp. may use the Last-In, First-Out (LIFO) method to value inventory because it can reduce taxable income and thus taxes. This is because the LIFO method assumes that the most recently acquired items are sold first, and if prices are rising, these items would have the highest cost, leading to a higher cost of goods sold (COGS) and lower profits on paper.
On the other hand, MPW Corp. might use the First-In, First-Out (FIFO) method if it wants to report higher profits. With FIFO, the assumption is the oldest items (which were cheaper if prices are rising) are sold first, which would result in a lower COGS and thus higher profits.
The decisions around which inventory valuation method to use are strategic and can depend on a variety of factors, including financial, tax, and operational considerations.