26. A Canadian company has a total of $450,000 in tax loss carryforwards. To use these losses and to diversify its operations, a US company has acquired the Canadian company through a merger. The US company expects to have earnings before taxes of $300,000 per year. Assume: the US company is in the 40-percent tax bracket and all the losses can be carried forward. How much tax can the US company reduce through this merger?

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asked 12 years ago in Economics by anonymous

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28. Assume that a company with a tax rate of 40 percent has acquired a firm with $5 million book value for $12 million. The acquiring company is located in a country where goodwill write-offs are deductible for tax purposes. The goodwill can be written off for a maximum of ten years. What is the amount of tax savings that the acquiring company can realize for ten years?

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13. A multinational company is considering the establishment of a two-year project in Germany with a $8 million initial investment. The company's cost of capital is 12 percent. The required rate of return on this project is 18 percent. The project with no salvage value after two years is expected to generate net cash flows of 12 million euros in year 1 and 30 million euros in year 2. Assume no taxes and a stable exchange rate of $0.60 per euro. What is the net present value of the project in dollar terms?

asked 12 years ago in Economics by anonymous

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27. A US company has $10,000 in cash available for 45 days. It can earn 1 percent on 45-day investment in the United States. Alternatively, if it converts the US dollars to Singapore dollars, it can earn 1.5 percent on a Singapore deposit for 45 days. The spot rate of the Singapore dollar is US$0.50. The spot rate 45 days from now is expected to be US$0.40. Should this company invest its cash in the United States or in Singapore?

asked 12 years ago in Economics by anonymous