3. Moser Materials Inc. is considering acquiring Newkirk Products, which produces a number of products that would enhance Moser’s product line. Last year, Newkirk reported a $30 million loss. Moser has estimated that Newkirk will break even in the fourth year after acquisition. The improvement in performance will come in four equal steps. Assuming Moser can demonstrate that the acquisition is not simply for tax purposes, calculate the present value of the tax savings that will result during the four-year period at a 12% discount rate.

Assume Moser has EBT far exceeding $30 million and is subject to a 40% marginal tax rate.