Which price would the acquirer be willing to pay

Reference no: EM133659550

Question:

Part 1 (Tax - indifference prices) In this exercise, we look at a taxable acquisition of a freestanding C Corp and you determine for which purchase price 1. the acquirer and 2. the target shareholders would be willing to change the acquisition structure. Assume the acquirer of a freestanding C Corp has a choice between two acquisition structures:

a) Asset sale (with subsequent liquidation)

b) Stock Sale w/o Sec 338 election If he opts for the stock sale w/o Sec 338 election, he would pay the shareholders of the freestanding C Corp $560m. Which price would the acquirer be willing to pay in the asset sale for his after tax net costs to be equal in the two acquisition scenarios?

Which price would the target shareholders require in the asset sale (with subsequent liquidation) for their after tax cash to be equal in the two acquisition scenarios? For your calculation, use the Excel file that I uploaded on Canvas (class 4) and the following input variables: target's asset basis=150, target shareholders' stock basis=150, corporate tax rate=21%, capital gains tax rate

Reference no: EM133659550

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