Question

Assume that Western Exploration Corp. is considering the acquisition of Ogden Drilling Company. The latter has a $650,000 tax loss carryforward. Projected earnings for the Western Exploration Corp. are as follows:

		2011			2012			2013			Total Values
	Before-tax income	$	285,000		$	340,000		$	460,000		$	1,085,000
	Taxes (34%)		96,900			115,600			156,400			368,900
	Income available to stockholders	$	188,100		$	224,400		$	303,600		$	716,100

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? (Do not round intermediate calculations and round your answers to the nearest whole dollar.)

Answer 1

Solution:-

a. How much will the total taxes of Western Exploration Corp. be reduced as a result of the tax loss carryforward:-

Total taxes of Western Exploration Corp. be reduced as a result of the tax loss carryforward

221,0000

Explanation:-

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

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