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In September, 2008, the IRS changed tax laws to allow banks toutilize the tax loss carryfo

In September, 2008, the IRS changed tax laws to allow banks toutilize the tax loss carryfo

In September, 2008, the IRS changed tax laws to allow banks toutilize the tax loss carryforwards of banks they acquire to shieldtheir future income from taxes (prior law had restricted theability of acquirers to use these credits). Suppose Fargo Bankacquired Covia Bonk and with it acquires $90 billion in tax losscarryforwards. If Fargo Bank is expected to generate taxable incomeof $15 billion per year in the future, and it tax rate is 30%, whatis the present value of these acquired tax loss carry forwardsgiven a cost of capital of 8%?

Abhinav 03-Dec-2019

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