ASSUME THAT A COMPANY WITH A TAX RATE OF 40 PERCENT HAS ACQUIRED A...

28. - BT THANH TOÁN QUỐC TẾ GLOBAL CORPORATE FINANCE DAP AN 28. - BT THANH TOÁN QUỐC TẾ GLOBAL CORPORATE FINANCE DAP AN
Toán BT THANH TOÁN QUỐC TẾ GLOBAL CORPORATE FINANCE DAP AN
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? A. $2.1 million B. $2.5 million * C. $2.8 million D. $3.5 million E. $4.8 million Solution: Goodwill = market value - book value = $12 million - $5 million = $7 million. Tax savings = goodwill x tax rate = $7 million x 0.40 = $2.8 million. Chapter 18 International Capital Budgeting Decisions