In September 2008, the IRS changed tax laws to allow banks to utilize the tax loss carryforwards of banks they acquire to shield their future income from taxes (prior law restricted the ability of acquirers to use these credits). Suppose Fargo Bank acquires Covia Bank and with it acquires $74 billion in tax loss carryforwards. If Fargo Bank is expected to generate taxable income of 10 billion per year in the future, and its tax rate is 30%, what is the present value of these acquired tax loss carryforwards given a cost of capital of 8%?
Answer to relevant QuestionsUsing the FCF projections in part (b) of Problem 11, calculate the NPV of the HomeNet project assuming a cost of capital ofa. 10%.b. 12%.c. 14%.What is the IRR of the project in this case?Suppose Amazon.com Inc. pays no dividends but spent $2 billion on share repurchases last year. If Amazon’s equity cost of capital is 8%, and if the amount spent on repurchases is expected to grow by 6% per year, estimate ...You read in the paper that Summit Systems from Problem 6 has revised its growth prospects and now expects its dividends to grow at 3% per year forever.a. What is the new value of a share of Summit Systems stock based on this ...Using the data in Table 10.2,a. What was the average dividend yield for the SP500 from 2002–2011?b. What was the volatility of the dividend yield?c. What was the average annual return of the SP500 from 2002–2011 ...Using the data in Problem 23, plot the volatility as a function of the number of firms in the two portfolios.In Problem 23, Consider an economy with two types of firms, S and I. S firms all move together. I firms move ...
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