The benefits and Health Care000 din bochelage Formatovenen op een of the We hopeder ned years as well der's expected within the lowed Watso my com w es S.com wewnatrayen Team monde Route mond mode M nas a cost of capital of 15.1%. Both TNS and Data Table are (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet) st est arest Year 1 2 3 4 5 6 7 Webster Industries Earnings before taxes $80,000 $120,000 $201,000 $302,000 $400,000 $400,000 $498,000 earest nearest nearest Print Done to the ne o the nearest dollar) Reilly's tax advantage from the acquisition in year 6 is $ (Round to the nearest dollar.) Reilly's tax advantage from the acquisition in year 7 is $ (Round to the nearest dollar) b. Webster's tax advantage from the acquisition in year 1 is $(Round to the nearest dollar) Webster's tax advantage from the acquisition in year 2 is s (Round to the nearest dollar.) Webster's tax advantage from the acquisition in year 3 is $ (Round to the nearest dollar) Webster's tax advantage from the acquisition in year 4 is $ (Round to the nearest dollar) Webster's tax advantage from the acquisition in year 5 is $ (Round to the nearest dollar) Webster's tax advantage from the acquisition in year 6 is $ (Round to the nearest dollar) Webster's tax advantage from the acquisition in year 7 is (Round to the nearest dollar) Jebster's tax advantage from the acquisition in year 6 is s (Round to the nearest dollar) Webster's tax advantage from the acquisition in year 7 is s (Round to the nearest dollar) c. The maximum cash price Reilly would be willing to pay for Hahn Textiles is $(Round to the nearest dollar) The maximum cash price Webster would be willing to pay for Hahn Textiles is $|| (Round to the nearest dollar) d. Use you uswers in parts a through to explain why a target company can have different values to different potential acquiring niems "Both firms receive similar amounts in tax shield benefits. However, Rollly can use these at an earlier time, therefore, the acquisition is worth more to! Is the above statement true or false? (Select from the drop-down menu) Enter your answer in each of the answer boxes. 1 Tax benefits and price Hahn Textiles has a tax loss carryforward of $802,000. Two firms are interested in acquiring Hahn for the tax loss advantage Reilly Investment Group has expected earnings before taxes of $200 500 per year for each of the next 7 years and a cost of capital of 15.1% Webster Industries has expected earnings before taxes for the next 7 years as shown in the following table Both Reilly's and Webster's expected earnings are assumed to fall within the annual limit legally allowed for application of the tax loss carryforward resulting from the proposed merger Webster has a cost of capital of 15.1% Both firms are subject to a 40% tax rate on ordinary income a. What is the tax advantage of the merger each year for Relly? b. What is the tax advantage of the merger each year for Webster? c. What is the maximum cash price each interested firm would be willing to pay for Hahn Textiles? (Hint Calculate the present value of the tax advantages) d. Use your answers in parts a through c to explain why a target company can have different values to different potential acquiring firms otes and equ a. Reilly's tax advantage from the acquisition in year 1 is $(Round to the nearest dollar) Reilly's tax advantage from the acquisition in year 2 is $ (Round to the nearest dollar) Reilly's tax advantage from the acquisition in year 3 is $(Round to the nearest dollar) Reilly's tax advantage from the acquisition in year 4 is s (Round to the nearest dollar) Reilly's tax advantage from the acquisition in year 5 is S (Round to the nearest dollar) Reilly's tax advantage from the acquisition in year 6 is $ (Round to the nearest dollar) ecome Reilly's tax advantage from the acquisition in year 7 is $ (Round to the nearest dollar) b. Webster's tax advantage from the acquisition in year 1 is $ . (Round to the nearest dollar) Webster's tax advantage from the acquisition in year 2 is s (Round to the nearest dollar) Webster's tax advantage from the acquisition in year 3 is s (Round to the nearest dollar) Webster's tax advantage from the acquisition in year 4 is s (Round to the nearest dollar) Webster's tax advantage from the acquisition in year 5 is SL (Round to the nearest dollar) Webster's tax advantage from the acquisition in year 6 is $ (Round to the nearest dollar) Webster's tax advantage from the acquisition in year 7 is $(Round to the nearest dollar) c. The maximum cash price Reilly would be willing to pay for Hahn Textiles is $ (Round to the nearest dollar) The maximum cash price Webster would be willing to pay for Hahn Textiles is $(Round to the nearest dollar) ne it potent d Year 1 2 3 4 5 6 Webster Industries Earnings before taxes $80,000 $120,000 $201.000 $302,000 $400,000 $400,000 $498,000 um jar) ar)
