In September$2008,$ the IRS changed tax laws to allow banks to utilize the tax loss carryforwards of banks they acquire to shield up to$100\%$ of their future income from taxes$($prior law restricted the ability of acquirers to use these$$ credits$).$ Suppose Fargo Bank acquired Covia Bank and with it acquired $ $74$ billion in tax loss carryforwards. If Fargo Bank was expected to generate taxable income of $ $10$ billion per year in the$$ future, and its tax rate was $30\%,$ what was the present value of these acquired tax loss carryforwards given a cost of capital of $8\%?$ How would the present value change under current law which restricts the amount of the deduction to $80\%$ of$$ pre$-$tax income?

Question content area bottom

Part $1$

If Fargo Bank was expected to generate taxable income of $ $10$ billion per year in the$$ future, and its tax rate was $30\%,$ what was the present value of these acquired tax loss carryforwards given a cost of capital of $8\%?$

The present value of these acquired tax loss carryforwards is $$$

$$

enter your response here billion. $($Round to two decimal$$ places.$)$