Reilly Investment | |||||||||
a) | |||||||||
Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | ||
EBT | 200000 | 200000 | 200000 | 200000 | 200000 | 200000 | 200000 | ||
Taxes @ 34% | 68000 | 68000 | 68000 | 68000 | 68000 | 68000 | 68000 | ||
Cum. taxes | 68000 | 136000 | 204000 | 272000 | 340000 | 408000 | 476000 | ||
Tax loss | 800000 | 800000 | 800000 | 800000 | 800000 | 800000 | 800000 | ||
Effective tax | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
Tax advantage | 68000 | 68000 | 68000 | 68000 | 68000 | 68000 | 68000 | ||
Net Cash Flow | 200000 | 200000 | 200000 | 200000 | 200000 | 200000 | 200000 | ||
Reilly tax advantage | year 1 | 68000 | |||||||
Reilly tax advantage | year 2 | 68000 | |||||||
Reilly tax advantage | year 3 | 68000 | |||||||
b) | Webster | ||||||||
Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | ||
EBT | 80000 | 122000 | 201000 | 302000 | 400000 | 402000 | 501000 | ||
Taxes @ 34% | 27200 | 41480 | 68340 | 102680 | 136000 | 136680 | 170340 | ||
Cum. taxes | 27200 | 68680 | 137020 | 239700 | 375700 | 512380 | 682720 | ||
Tax loss | 800000 | 800000 | 800000 | 800000 | 800000 | 800000 | 800000 | ||
Effective tax | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
Tax advantage | 27200 | 41480 | 68340 | 102680 | 136000 | 136680 | 170340 | ||
Net Cash Flow | 80000 | 122000 | 201000 | 302000 | 400000 | 402000 | 501000 | ||
webster tax advantage | year 1 | 27200 | |||||||
webster tax advantage | year 2 | 41480 | |||||||
webster tax advantage | year 3 | 68340 | |||||||
Tax benefits and price Hahn Texiles has a tax loss carryforward of $800,000 Two ams are intereste...
Tax benefits and price Hahn Textiles has a tax loss carryforward of $802,000 Two firms are interested in acquiring Hahn for the tax loss advantage. Reilly Investment Group has expected earnings before taxes of $200,500 per year for each of the next 7 years and a cost of capital of 14.9% Webster Industries has expected earnings before taxes for the next 7 years as shown in the following tablo, Both Reilly's and Webster's expected earnings are assumed to fall within...
+ Question Help Tax effects of acquisition Trapani Tool Company is evaluating the acquisition of Sussman Casting, Sussman has a tax loss carryforward of $2,100,000 Trapani can purchase Sussman for $3,000,000 it can sell the assets for $2,400,000, their book value. Trapani expects earnings before taxes in the 5 years after the merger to be as shown in the following table ! The expected earrings given are assumed to fall within the annual limit that is legally allowed for application...