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 bilion 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 pre-tax income? 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 canyforwards given a cost of capital of 8%? The present value of these acquired tax loss carryforwards is $bilion (Round to two decimal places)
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 bilion 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 pre-tax income? 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 canyforwards given a cost of capital of 8%? The present value of these acquired tax loss carryforwards is $bilion (Round to two decimal places)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text: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
Kability 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%7 How would the present value change
under current law which restricts the amount of the deduction to 80% of pre-tax income?
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 $bilion (Round to two decimal places)
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