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Consider two firms, Puget Corporation and Quantum Company. Both corporations will either make $21,000 or lose $6,000 every year with equal probability. The firms' profits
Consider two firms, Puget Corporation and Quantum Company. Both corporations will either make $21,000 or lose $6,000 every year with equal probability. The firms' profits are perfectly negatively correlated. The corporate tax rate is 25%. What is the difference between the total expected after-tax profit if the two firms merge and their total expected after-tax profits when they are two separate firms, assuming no tax-loss carryforwards or carrybacks? O $1,000 $1,250 O $1,500 O $1,750 O $2,000
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