Problem on cash purchase of park place corporation

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Question: Boardwalk Corporation desires to expand. It is considering a cash purchase of Park Place Corporation for $2,400,000. Park Place has a $600,000 tax loss carry forward that could be used immediately by Boardwalk, which is paying taxes at the rate of 35 percent. Park Place will provide $300,000 per year in cash flow (aftertax income plus depreciation) for the next 20 years. If Boardwalk Corporation has a cost of capital of 11 percent, should the merger be undertaken?

Reference no: EM131792610

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Problem on cash purchase of park place corporation : Boardwalk Corporation desires to expand. It is considering a cash purchase of Park Place Corporation for $2,400,000. Park Place has a $600,000 tax loss.

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