Target Corporation has net assets valued at $800,000 and an NOL of $120,000. On January 1 of the current year, Target is acquired by Successor Corporation in a restructuring qualifying as a tax-free reorganization that causes an ownership shift of 80 percentage points for the Target shareholders. Successor uses a calendar year for tax purposes. Assume that the Federal long-term interest rate is 5%, Successor earns a 6% after-tax rate of return, and Successor's marginal state and Federal income tax rate is 25% for all years involved.

What is the maximum amount Successor should be willing to pay Target for its NOL, if Successor uses a 6% discount factor (which is 2.6730) for this decision?

Answer rating: 100% (QA)

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