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Use the following information to answer the question(s) below. Really Big Conglomerate (RBC) is considering acquiring POP, Inc., a smaller unsuccessful Internet firm. POP has
Use the following information to answer the question(s) below. Really Big Conglomerate (RBC) is considering acquiring POP, Inc., a smaller unsuccessful Internet firm. POP has outstanding tax loss carryforwards of $320 million from losses over the past six years. RBC has pre- tax income of $100 million per year, a cost of capital of 10%, and pays 21% in taxes. The Tax Cuts and Jobs Act of 2017 will limit RBC's ability to write off the carryforwards to 80% of RBC's annual pre- tax income. If RBC acquires POP, in what year will RBC completely use up the tax loss carryforward? A. 3 years B. 2 years C. 4 years D. 5 years
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