Are my calculations correct?

P181 Tax effects of acquisition Connors Shoe Company is contemplating the acquisition of Salinas Boots, a firm that has shown large operating tax losses over the past few years. As a result of the acquisition, Connors believes that the total pretax profits of the merger will not change from their present level for 15 years. The tax loss carryforward of Salinas is $800,000, and Connors projects that its annual earnings before taxes will be $280,000 per year for each of the next 15 years. These earnings are assumed to fall within the annual limit legally allowed for application of the tax loss carryforward resulting from the proposed merger (see footnote 2 earlier in this chapter). The firm is in the 21% tax bracket.

a. If Connors does not make the acquisition, what will be the companys tax liability and earnings after taxes each year over the next 15 years?

Specifications tax loss carry-forward of Salinas $800,000, Connors annual earnings before taxes $280,000, number of years 15, and tax bracket 40%

Earnings after taxes for the next 15 years without merger:

Particulars	Year 1 to Year 15
Earnings before taxes	$280,000
Taxes at 40% (Earnings before taxes x 40%)	$112,000
Earnings after taxes (Earnings before taxes taxes)	$168,000

Tax liability = $112,000

Earnings after taxes per annum = $168,000

b. If the acquisition is made, what will be the companys tax liability and earnings after taxes each year over the next 15 years?

Earnings after taxes for the next 15 years with merger:

Specifics	Year 1	Year 2	Year 3	Year 4-15
Earnings before taxes	$280,000	$280,000	$280,000	$280,000
Tax loss carry forward	$280,000	$280,000	$240,000 ($800,000) (-$280,000) (-$280,000)	-
Earnings before taxes after adjusting for tax loss carry forward (Earnings before taxes Tax loss carry forward)	$0	$0	$40,000	$280,000
Taxes at 40% (Earnings before taxes after adjusting for tax loss carry forward x 40%)	$0	$0	$16,000	$112,000
Earnings after taxes (Earnings before taxes Taxes at 40%)	$280,000	$280,000	$264,000	$168,000

c. If Salinas can be acquired for $350,000 in cash, should Connors make the acquisition, judging on the basis of tax considerations? (Ignore present value.)

Earnings before taxes after adjusting for tax loss carry forward is as per Part (b) and other variables are as per given information:

Cash acquisition = $350,000

Specifics	Year 1	Year 2	Year 3
Earnings before taxes	$280,000	$280,000	$280,000
Taxes at 40%	$112,000	$112,000	$112,000
Tax paid	-	-	$16,000
Tax savings	$112,000	$112,000	$96,000

Total tax savings = $112,000 + $112,000 + $96,000 = $320,000

In this case, the total savings ($320,00) are less than the total cost ($350,000) thus, the cost exceeds the benefit of the acquisition making it an unprofitable venture