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Assume that Western Exploration Corp. is considering the acquisition of Ogden Drilling Company. The latter has a $510,000 tax loss carryforward. Projected earnings for the

Assume that Western Exploration Corp. is considering the acquisition of Ogden Drilling Company. The latter has a $510,000 tax loss carryforward. Projected earnings for the Western Exploration Corp. are as follows:

2011 2012 2013 Total values
Before-tax income $ 195,000 $ 270,000 $ 390,000 $ 855,000
Taxes (40%) 78,000 108,000 156,000 342,000








Income available to stockholders $ 117,000 $ 162,000 $ 234,000 $ 513,000

















(a)

How much will the total taxes of Western Exploration Corp. be reduced as a result of the tax loss carryforward? (Omit the "$" sign in your response.)

Reduction in taxes $
(b)

How much will the total income available to stockholders be for the three years if the acquisition occurs? (Omit the "$" sign in your response.)

2011 2012 2013 Total
Income available to stockholders $ $ $ $

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