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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 |
| | | | | | | | |
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(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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