These earnings are assumed to fall within the limit legally allowed for application of a tax loss carryforward resulting from the proposed acquisition.) Maxi has a 40 percent tax rate and a cost of capital of 10 percent. The total present value of tax advantage of the acquisition in the following three years is
A. $440,000.
B. $842,000.
C. $1.1 million.
D. $2.75 million.
Answer:B
These earnings are assumed to fall within the limit legally allowed for application of a tax loss carryforward resulting from the proposed acquisition.) Maxi has a 40 percent tax rate and a cost of capital of 10 percent. The total present value of tax advantage of the acquisition in the following three years is
A. $440,000. B. $842,000. C. $1.1 million. D. $2.75 million.