Considering the opportunity to expand its operations

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Brandon's corporation is considering the opportunity to expand its operations. They have the opportunity to make a cash purchase of $4 million for Whiteman co. Whiteman has a $500,000 tax loss carryforward that Brandon Corp. could use immediately. Whiteman will contribute $450,000/ year in cash flow (aftertax income plus depreciation) for the next 15 years. If Brandon's cost of capital is 12% and tax rate is 30%, should the merger happen? Please show work.

Reference no: EM132019198

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