J & J Enterprises is considering a cash acquisition of Patterson Steel Company for $4,100,000. Patterson will provide the following pattern of cash inflows and synergistic benefits for the next 20 years. There is no tax loss carryforward. Use Appendix D.
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J & J Enterprises is considering a cash acquisition of Patterson Steel Company for $4,100,000. Patterson will provide the following pattern of cash inflows and synergistic benefits for the next 20 years. There is no tax loss carryforward. Use Appendix D.
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Related questions
Worldwide Scientific Equipment is considering a cash acquisition of Medical Labs for $1.3 million. Medical Labs will provide the following pattern of cash inflows and synergistic benefits for the next 25 years. There is no tax loss carryforward. Use Appendix D as an approximate answer, but calculate your final answer using the formula and financial calculator methods.
| Years | |||
| 1â5 | 6â15 | 16â25 | |
| Cash inflow (aftertax) | $120,000 | $140,000 | $180,000 |
| Synergistic benefits (aftertax) | 17,000 | 27,000 | 47,000 |
The cost of capital for the acquiring firm is 12 percent.
a. Compute the net present value. (Negative amount should be indicated by a minus sign. Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your final answer to 2 decimal places.)
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Assume that Western Exploration Corp. is considering the acquisition of Ogden Drilling Company. The latter has a $630,000 tax loss carryforward. Projected earnings for the Western Exploration Corp. are as follows:
| 2011 | 2012 | 2013 | Total Values | |||||||||
| Before-tax income | $ | 275,000 | $ | 320,000 | $ | 440,000 | $ | 1,035,000 | ||||
| Taxes (40%) | 110,000 | 128,000 | 176,000 | 414,000 | ||||||||
| Income available to stockholders | $ | 165,000 | $ | 192,000 | $ | 264,000 | $ | 621,000 | ||||
a. How much will the total taxes of Western Exploration Corp. be reduced as a result of the tax loss carryforward? (Do not round intermediate calculations and round your answer to the nearest whole dollar.)
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b. How much will the total income available to stockholders be for the three years if the acquisition occurs? (Do not round intermediate calculations and round your answers to the nearest whole dollar.)
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Assume that Western Exploration Corp. is considering the acquisition of Ogden Drilling Company. The latter has a $630,000 tax loss carryforward. Projected earnings for the Western Exploration Corp. are as follows:
| 2011 | 2012 | 2013 | Total Values | |||||||||
| Before-tax income | $ | 275,000 | $ | 320,000 | $ | 440,000 | $ | 1,035,000 | ||||
| Taxes (40%) | 110,000 | 128,000 | 176,000 | 414,000 | ||||||||
| Income available to stockholders | $ | 165,000 | $ | 192,000 | $ | 264,000 | $ | 621,000 | ||||
a. How much will the total taxes of Western Exploration Corp. be reduced as a result of the tax loss carryforward? (Do not round intermediate calculations and round your answer to the nearest whole dollar.)
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b. How much will the total income available to stockholders be for the three years if the acquisition occurs? (Do not round intermediate calculations and round your answers to the nearest whole dollar.)
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