The Wayne Corporation desires to expand. It is considering a cash purchase of the Gretz Corporation, a

Question:

The Wayne Corporation desires to expand. It is considering a cash purchase of the Gretz Corporation, a company in a similar business, for $3 million. The Gretz Corporation has a $600,000 tax loss carry-forward that could be used immediately by the Wayne Corporation, which is paying taxes at the rate of 40 percent. The Gretz Corporation is projected to provide $380,000 per year in available cash flows for the next 20 years. If the Wayne Corporation considers its cost of capital as 11 percent should it pursue the Gretz merger?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...

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