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Toni's Typesetters is analyzing a possible merger with Pete's Print Shop. Toni's has a tax loss...
Toni's Typesetters is analyzing a possible merger with Pete's Print Shop. Toni's has a tax loss carryforward of $ 400,000, which it could apply to Pete's expected earnings before taxes of $200,000 per year for the next 5 years. Using a 38 % tax rate, compare the earnings after taxes for Pete's over the next 5 years both without and with the merger.
Without the merger, Pete's Print Shop's earnings after taxes in years 1 through 5 is $_________ (Round to the nearest dollar.)
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| With Merger | |||||
| years | cash flow | tax loss | profit before tax | tax @38% | earning after tax |
| 1 | $ 2,00,000.00 | $ 2,00,000.00 | $ 2,00,000.00 | ||
| 2 | $ 2,00,000.00 | $ 2,00,000.00 | $ 2,00,000.00 | ||
| 3 | $ 2,00,000.00 | $ 2,00,000.00 | $ 76,000.00 | $ 1,24,000.00 | |
| 4 | $ 2,00,000.00 | $ 2,00,000.00 | $ 76,000.00 | $ 1,24,000.00 | |
| 5 | $ 2,00,000.00 | $ 2,00,000.00 | $ 76,000.00 | $ 1,24,000.00 | |
| total | $ 7,72,000.00 | ||||
| Without Merger | |||||
| years | cash flow | tax loss | profit before tax | tax @38% | earning after tax |
| 1 | $ 2,00,000.00 | $ 2,00,000.00 | $ 76,000.00 | $ 1,24,000.00 | |
| 2 | $ 2,00,000.00 | $ 2,00,000.00 | $ 76,000.00 | $ 1,24,000.00 | |
| 3 | $ 2,00,000.00 | $ 2,00,000.00 | $ 76,000.00 | $ 1,24,000.00 | |
| 4 | $ 2,00,000.00 | $ 2,00,000.00 | $ 76,000.00 | $ 1,24,000.00 | |
| 5 | $ 2,00,000.00 | $ 2,00,000.00 | $ 76,000.00 | $ 1,24,000.00 | |
| total | $ 6,20,000.00 | ||||
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