Answer Happy

The Clark Corporation desires to expand. It is considering a cash purchase of Kent Enterprises for $3.2 million, Kent has a $730,000 tax loss carryforward that could be used immediately by the Clark Corporation, which is paying taxes at the rate of 35 percent. Kent will provide $430,000 per year in cash flow (aftertax income plus depreciation) for the next 25 years. The discount rate is 13 percen Use Aprendix D as an approximate answer, but calculate your final answer using the formula and financial calculator methods. a. Compute the net present value. (Negative amount should be indicated by a minus sign. Do not round Intermediate calculation Round your final answer to 2 decimal places.) Not present value b. Should the merger be undertaken? Yes Ο Νο
The Clark Corporation desires to expand. It is considering a cash purchase of Kent Enterprises for $3.2 million, Kent has a $730,000 tax loss carryforward that could be used immediately by the Clark Corporation, which is paying taxes at the rate of 35 percent. Kent will provide $430,000 per year in cash flow (aftertax income plus depreciation) for the next 25 years. The discount rate is 13 percent. Use Aprendix D as an approximate answer, but calculate your final answer using the formula and financial calculator methods. a. Compute the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to 2 decimal places.) Not present value b. Should the merger be undertaken? Yes No