The Clark Corporation desires to expand. It is considering a cash purchase of Kent Enterprises for $3

Question:

The Clark desires to expand. It is considering a cash purchase of Kent Enterprises for $3 million. Kent has a $700,000 tax loss carryforward that could be used immediately by the Clark which is paying taxes at the rate of 30 percent. Kent will provide $420,000 per year in cash flow (aftertax income plus depreciation) for the next 20 years. If the Clark has a of 13 percent, should the merger be undertaken?

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