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How much will total taxes of arrow corporation be reduced

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Reference no: EM132767524

Assume the Arrow Corporation is considering the acquisition of Failure Unlimited. The latter has a $400,000 tax loss carry-forward. Projected earnings for the Arrow Corporation are as follows:

                                               20XX               20XY              20XZ             Total

Before-tax income                  $160,000           $200,000     $320,000       $680,000

Taxes (25%)                           40,000             50,000          80,000             170,000

Income available to shareholders  $120,000          $150,000    $240,000         $510,000

Problem a. How much will the total taxes of Arrow Corporation be reduced as a result of the tax loss carry-forward?

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

Reference no: EM132767524

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