Assume that Western Exploration Corp. is considering the acquisition of Ogden Drilling Company. The latter has a $510,000 tax loss carryforward. Projected earnings for the Western Exploration Corp. are as follows:
|
2011 |
2012 |
2013 |
Total values |
| Before-tax income |
$ |
195,000 |
$ |
270,000 |
$ |
390,000 |
$ |
855,000 |
| Taxes (40%) |
|
78,000 |
|
108,000 |
|
156,000 |
|
342,000 |
|
|
|
|
|
|
|
|
|
| Income available to stockholders |
$ |
117,000 |
$ |
162,000 |
$ |
234,000 |
$ |
513,000 |
|
|
|
|
|
|
|
|
|
|
| (a) |
How much will the total taxes of Western Exploration Corp. be reduced as a result of the tax loss carryforward? (Omit the "$" sign in your response.)
|
| (b) |
How much will the total income available to stockholders be for the three years if the acquisition occurs? (Omit the "$" sign in your response.)
|