Assume that Western Exploration Corp. is considering the acquisition of Ogden Drilling Company. The latter has a $470,000 tax loss carryforward. Projected earnings for the Western Exploration Corp. are as follows:

a. How much will the total taxes of Western Exploration Corp. be reduced as a result of the tax loss carryforward?
b. How much will the total income available to stockholders be for the three years if the acquisition occurs? Use the same format as that in thetext.

Transcribed Image Text:

Total Values 2011 2012 2013 Before-tax income Taxes (35%) Income available S185,000 S250,000 S370,000 S805,000 64,750 87,500 129,500 281750 $120,250 S162,500 S240,500 S523,250 to stockholders.