12.11 Target Company has incurred $5 million in losses during the past 3 years. Acquiring Company anticipates

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12.11 Target Company has incurred $5 million in losses during the past 3 years. Acquiring Company anticipates pretax earnings of $3 million in each of the next 3 years. What is the difference between the taxes that Acquiring Company would have paid before the merger as compared to actual taxes paid after the merger, assuming a marginal tax rate of 40%?

Answer: $2 million.

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Muhammad Salman Alvi

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