Assume that Western Exploration Corporation is considering the acquisition of Ogden Drilling Company. The latter has a $590,000 taxloss carryforward. Projected earnings for the Western Exploration Corporation are as follows:Before-tax incomeTaxes (40%)Income available to stockholders20X1$ 255,000102,00020X2$ 280,000112,00020X3$ 400,000160,000Total Values$ 935,000374,000$ 153,000$ 168,000$ 240,000$ 561,000a. How much will the total taxes of Western Exploration Corporation be reduced as a result of the tax loss carryforward?Note: Do not round intermediate calculations and round your answer to the nearest whole dollar.× Answer is complete but not entirely correct.Reduction in taxes$ 252,000 Xb. How much will the total income available to stockholders be for the three years if the acquisition occurs?Note: Do not round intermediate calculations and round your answers to the nearest whole dollar.> Answer is complete but not entirely correct.20X120X220X3Income available to stockholders$153,000 $168,000 $240,000 $Total561,000

a. To calculate for the reduction in taxes due to tax loss carryforward , the formula isReduction in…

Answered: Assume that Western Exploration…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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(Corporate income tax) Last year Sanderson, Inc. had sales of $3.2 million. The firm's cost of goods sold came to $2.1 million, its operating expenses excluding Kdepreciation of $100,000 were $402,000, and the firm paid $152,000 in interest on its bank loans. Also, the corporation received $55,000 in dividend income (from a company in which it owned less than 20 percent of its shares) but paid $26,000 in the form of dividerids to its own common stockholders. Use the corporate tax rates shown in the popup window, to calculate the corporation's tax liability. What are the firm's average and marginal tax rates? The firm's tax liability for the year is $ (Round to the nearest dollar.) w an example Data table Taxable Income $0-$50,000 $50,001-$75,000 $75,001-$100,000 $100,001-$335,000 Marginal Tax Rate 15% 25% 34% 39% $335,001-$10,000,000 34% $10,000,001-$15,000,000 35% $15,000,001-$18,333,333 38 % 35% Over $18,333,333 (Click on the icon in order to copy its contents into a spreadsheet.)…
10. The financial manager of Company X is evaluating Company Y as a possible acquisition. Company Y is expected to produce annual earnings before interest and taxes P485,000. Depreciation write-offs on Company Y's assets are P120,000 annually. Both companies have a 34% marginal tax rate. If the merger takes place, Company X will assume P1,425,000 of Company Y's long-term liabilities. Company X's weighted average cost of capital is 9.25% and Company Y's weighted average cost of capital is 14.75%. The acquisition will be evaluated as a perpetuity. If Company X acquires Company Y for P1.125,000 in cash, then the estimated change in the combined wealth of Company X's shareholders will be nearest a. P433,729 increase. b. P1,558,729 increase. C. P379,830 decrease. d. P2,207,838 increase.
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Assume that Clampett, Inc. has $200,000 of sales, $150,000 of cost of goods sold, $60,000 of interest income, and $40,000 of dividends. What is Clampett, Inc.'s excess net passive income? $25,000. $75,000. $100,000. $0. None of the choices are correct.
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Genie Company has operating income after taxes of P50,000. It has P200,000 of equity capital, which has an after-tax weighted-average cost of 12%. Genie also has P10,000 of current liabilities (noninterest-bearing) and no long-term liabilities. What is the company's economic value added (EVA) for the period?
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1. In its most recent year, HiFlyer Plc’s return on capital was 50% on the reported invested capital of $2 billion. An analyst decides to treat Research and Development expenditure as capital expenditure and estimates the value of the research asset to be $1 billion. The Research and Development expenditure was $300 million and the amortisation of the research asset was $200 million. There is no tax. a. Re-estimate the return on capital of HiFlyer.
McEwen mining recently reported $130000 off sales$68500 of operating cost other than depreciation and $10200 off depreciation. The company has $20000 of outstanding bonds that carry a 6% interest rate and its tax rate was 35%. what was the firms net income
1
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Davidson Corp. generated $25,000 in EBIT, $9,000 in depreciation, and spent $12,000 on capital expenditures and another $6,000 on net operating working capital. Davidson’s tax rate is 40% and its stock price is $35 per share. Free cash flow for Davidson is closest to: Question 40 options: $6,000 $22,000 $13,000 ($2,000)

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