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Question: Assume that Western Exploration Corp. is considering the acquisition of Ogden Drilling Company. The latter has a $430,000 tax loss carryforward. Projected earnings for the Western Exploration Corp. are as follows:

2011 2012 2013

Total Values Before-tax income $ 175,000 $ 230,000 $ 350,000 $ 755,000

Taxes (35%) 61,250 80,500 122,500 264,250

Income available to stockholders $ 113,750 $ 149,500 $ 227,500 $ 490,750

a. How much will the total taxes of Western Exploration Corp. be reduced as a result of the tax loss carryforward? (Do not round intermediate calculations and round your answer to the nearest whole dollar.)

b. How much will the total income available to stockholders be for the three years if the acquisition occurs?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92778546

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