Computation of the present value of cash flows; taxable acquisition, changing tax basis of assets. Refer to the data in the preceding problem. Assume now that the acquisition is taxable, so that the tax basis of the assets acquired changes after the purchase. If the purchase price is $V, then depreciation charges will be $V -^ 20 per year for 20 years. Income taxes will be 40 percent of pretax income. What is the maximum Bages Company should be willing to pay for Lynch Company?

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