The Charles Corporation desires to expand. It is considering a cash purchase of Atlas Enterprises for $2,000,000.

Question:

The Charles Corporation desires to expand. It is considering a cash purchase of Atlas Enterprises for $2,000,000. The Atlas Corporation has a $600,000 tax loss carry-forward that could be used immediately by the Charles Corporation, which is paying taxes at the rate of 25 percent. Atlas will provide $260,000 per year in cash flow (aftertax income plus CCA) for the next 20 years. If the Charles Corporation has a cost of capital of 12 percent, should the merger be undertaken?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...

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