The reduction in the total taxes of Western Exploration Corp. due to tax loss carry forward. Introduction: Tax loss carry forward: It is a mechanism through which organizations can bring down their future income taxes by carrying forward prior losses to offset future profits.

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Answer 1

Question

Chapter 20, Problem 2P

a.

Summary Introduction

To calculate: The reduction in the total taxes of Western Exploration Corp. due to tax loss carry forward.

Introduction:

Tax loss carry forward:

It is a mechanism through which organizations can bring down their future income taxes by carrying forward prior losses to offset future profits.

b.

Summary Introduction

To calculate: The total income available for 3 years for the stockholders of Western Exploration Corp.

Introduction:

Stockholder:

A stockholder can be any organization or individual that/who has a substantial interest in the profitability of a business and holds shares in a corporation.

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Assume that Western Exploration Corp. is considering the acquisition of Ogden Drilling Company. The latter has a $500,000 tax loss carryforward. Projected earnings for the Western Exploration Corp. are as follows: Before-tax income Taxes (40%) Income available to stockholders. Reduction in taxes 2011 $210,000 84,000 $126,000 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.) Income available to stockholders 2012 $250,000 2013 $420,000 165,000 100,000 $150,000 $252,000 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.) 2011 Total Values $880,000 352,000 $528,000 2012 2013 Total

Hahn Textiles has a tax loss carryforward of $800,000. Two firms are interested in acquiring Hahn for the tax loss advantage. Reilly Investment Group has expected earnings before taxes of $200,000 per year for each of the next 7 years and a cost of capital of 14.7%. Webster Industries has expected earnings before taxes for the next 7 years as shown in the following table Webster Industries Year Earnings before taxes 1 $78,000 2 $118,000 3 $201,000 4 $298,000 5 $400,000 6 $398,000 7 $499,000 Both Reilly's and Webster's expected earnings are assumed to fall within the annual limit legally allowed for application of the tax loss carryforward resulting from the proposed merger. Webster has a cost of capital of 14.7%. Both firms are subject to a 38% tax rate on ordinary income. a. The maximum cash price Webster would be willing to pay for Hahn Textiles is ?

The following information refers to Questions No. 13 through 15: The financial manager of Apple Co. is evaluating Banana Co. as a possible acquisition. Banana Co. is expected to produce annual after-tax operating cash flows of PI,500,000. Apple Co. will assume P1,000,000 of Banana Co.'s long-term liabilities. Apple Co.'s weighted average cost of capital is 12% and Banana Co.'s weighted average cost of capital is 15%. The acquisition will be evaluated as a perpetuity. Apple Co.'s common stock is trading at P25 per share with 1,000,000 shares outstanding and a P/E ratio of 10. Banana Co.'s stock is trading at P15 per share with 600,000 shares outstanding and a P/E ratio of 15. Based on this information, the estimated market value of the target- company is nearest P 9,000,000. b. 13. a. P10,000,000. P11,000,000. P11,500,000. с. d.

Answer 2

Question

Chapter 20, Problem 2P

a.

Summary Introduction

To calculate: The reduction in the total taxes of Western Exploration Corp. due to tax loss carry forward.

Introduction:

Tax loss carry forward:

It is a mechanism through which organizations can bring down their future income taxes by carrying forward prior losses to offset future profits.

b.

Summary Introduction

To calculate: The total income available for 3 years for the stockholders of Western Exploration Corp.

Introduction:

Stockholder:

A stockholder can be any organization or individual that/who has a substantial interest in the profitability of a business and holds shares in a corporation.

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Answer 3

Question

Chapter 20, Problem 2P

a.

Summary Introduction

To calculate: The reduction in the total taxes of Western Exploration Corp. due to tax loss carry forward.

Introduction:

Tax loss carry forward:

It is a mechanism through which organizations can bring down their future income taxes by carrying forward prior losses to offset future profits.

b.

Summary Introduction

To calculate: The total income available for 3 years for the stockholders of Western Exploration Corp.

Introduction:

Stockholder:

A stockholder can be any organization or individual that/who has a substantial interest in the profitability of a business and holds shares in a corporation.

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Answer 4

Question

Chapter 20, Problem 2P

a.

Summary Introduction

To calculate: The reduction in the total taxes of Western Exploration Corp. due to tax loss carry forward.

Introduction:

Tax loss carry forward:

It is a mechanism through which organizations can bring down their future income taxes by carrying forward prior losses to offset future profits.

b.

Summary Introduction

To calculate: The total income available for 3 years for the stockholders of Western Exploration Corp.

Introduction:

Stockholder:

A stockholder can be any organization or individual that/who has a substantial interest in the profitability of a business and holds shares in a corporation.

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Answer 5

Chapter 20, Problem 2P

a.

Summary Introduction

To calculate: The reduction in the total taxes of Western Exploration Corp. due to tax loss carry forward.

Introduction:

Tax loss carry forward:

It is a mechanism through which organizations can bring down their future income taxes by carrying forward prior losses to offset future profits.

b.

Summary Introduction

To calculate: The total income available for 3 years for the stockholders of Western Exploration Corp.

Introduction:

Stockholder:

A stockholder can be any organization or individual that/who has a substantial interest in the profitability of a business and holds shares in a corporation.

Answer 6

Chapter 20, Problem 2P

a.

Summary Introduction

To calculate: The reduction in the total taxes of Western Exploration Corp. due to tax loss carry forward.

Introduction:

Tax loss carry forward:

It is a mechanism through which organizations can bring down their future income taxes by carrying forward prior losses to offset future profits.

Answer 7

Chapter 20, Problem 2P

a.

Summary Introduction

To calculate: The reduction in the total taxes of Western Exploration Corp. due to tax loss carry forward.

Introduction:

Tax loss carry forward:

It is a mechanism through which organizations can bring down their future income taxes by carrying forward prior losses to offset future profits.

Answer 8

b.

Summary Introduction

To calculate: The total income available for 3 years for the stockholders of Western Exploration Corp.

Introduction:

Stockholder:

A stockholder can be any organization or individual that/who has a substantial interest in the profitability of a business and holds shares in a corporation.

Answer 9

b.

Summary Introduction

To calculate: The total income available for 3 years for the stockholders of Western Exploration Corp.

Introduction:

Stockholder:

A stockholder can be any organization or individual that/who has a substantial interest in the profitability of a business and holds shares in a corporation.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 20 - Prob. 1DQ Ch. 20 - Prob. 2DQ Ch. 20 - Prob. 3DQ Ch. 20 - Prob. 4DQ Ch. 20 - What is synergy? What might cause this result? Is...Ch. 20 - Prob. 6DQ Ch. 20 - Prob. 7DQ Ch. 20 - Prob. 8DQ Ch. 20 - Prob. 9DQ Ch. 20 - Prob. 10DQ

The reduction in the total taxes of Western Exploration Corp. due to tax loss carry forward. Introduction: Tax loss carry forward: It is a mechanism through which organizations can bring down their future income taxes by carrying forward prior losses to offset future profits.

Solution Summary: The author explains how Western Exploration Corp.'s tax loss carry forward reduces its taxes by carrying forward prior losses to offset future profits.

Concept explainers

To calculate: The reduction in the total taxes of Western Exploration Corp. due to tax loss carry forward.

Introduction:

Tax loss carry forward:

It is a mechanism through which organizations can bring down their future income taxes by carrying forward prior losses to offset future profits.

To calculate: The total income available for 3 years for the stockholders of Western Exploration Corp.

Introduction:

Stockholder:

A stockholder can be any organization or individual that/who has a substantial interest in the profitability of a business and holds shares in a corporation.

Want to see the full answer?

Chapter 20 Solutions

The reduction in the total taxes of Western Exploration Corp. due to tax loss carry forward. Introduction: Tax loss carry forward: It is a mechanism through which organizations can bring down their future income taxes by carrying forward prior losses to offset future profits.

Solution Summary: The author explains how Western Exploration Corp.'s tax loss carry forward reduces its taxes by carrying forward prior losses to offset future profits.

Concept explainers

To calculate: The reduction in the total taxes of Western Exploration Corp. due to tax loss carry forward. Introduction: Tax loss carry forward: It is a mechanism through which organizations can bring down their future income taxes by carrying forward prior losses to offset future profits.

To calculate: The total income available for 3 years for the stockholders of Western Exploration Corp. Introduction: Stockholder: A stockholder can be any organization or individual that/who has a substantial interest in the profitability of a business and holds shares in a corporation.

Want to see the full answer?

Chapter 20 Solutions

To calculate: The reduction in the total taxes of Western Exploration Corp. due to tax loss carry forward.

Introduction:

Tax loss carry forward:

It is a mechanism through which organizations can bring down their future income taxes by carrying forward prior losses to offset future profits.

To calculate: The total income available for 3 years for the stockholders of Western Exploration Corp.

Introduction:

Stockholder:

A stockholder can be any organization or individual that/who has a substantial interest in the profitability of a business and holds shares in a corporation.