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    Alpha Corporation is considering buying Beta Corporation for

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    Alpha Corporation is considering buying Beta Corporation for $2,400,000 cash. Beta Corporation has a $600,000 tax loss carryforward that could be used immediately by Alpha Corporation. Alpha Corporation pays tax at the rate of 35%. Beta Corporation will provide $300,000 per year in cash flow (in after tax income plus depreciation) for the next 20 years. If Alpha Corporation has a cost of capital of 11%, should Alpha Corporation go forward with the acquisition? (Show your work/calculations/formulas)

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    https://brainmass.com/business/beta-and-required-return-of-a-project/alpha-corporation-is-considering-buying-beta-corporation-for-452748

    Solution Preview

    $2,400,000 - $600,000 = $1,800,000 to acquire Beta Corporation.

    11(1-35%) = 7.15% = interest rate ...

    Solution Summary

    Alpha Corporation is considering buying Beta Corporation for $2,400,000 cash. Beta Corporation has a $600,000 tax loss carryforward that could be used immediately by Alpha Corporation. Alpha Corporation pays tax at the rate of 35%. Beta Corporation will provide $300,000 per year in cash flow (in after tax income plus depreciation) for the next 20 years. If Alpha Corporation has a cost of capital of 11%, should Alpha Corporation go forward with the acquisition? (Show your work/calculations/formulas)

    $2.19