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pompa pompa
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7 years ago
Maxi, Inc. is evaluating the acquisition of Mini, Inc., which had a loss carryforward of $2.75 million which resulted from earlier operations. Maxi can purchase Mini for $3.5 million and liquidate the assets for $1.25 million. Maxi expects earnings before taxes in the three years following the acquisition to be as follows:


(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) $440,374
B) $842,374
C) $1.1 million
D) $2.75 million
Textbook 
Principles of Managerial Finance

Principles of Managerial Finance


Edition: 14th
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UlainUlain
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TU!
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thank youn
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