Use the Following Information to Answer the Question(s)below

question 60

Multiple Choice

Use the following information to answer the question(s) below.
Really Big Conglomerate (RBC) is considering acquiring POP,Inc. ,a smaller unsuccessful Internet firm.POP has outstanding tax loss carryforwards of $320 million from losses over the past six years.RBC has pre-tax income of $100 million per year,a cost of capital of 10%,and pays 21% in taxes.The Tax Cuts and Jobs Act of 2017 will limit RBC's ability to write off the carryforwards to 80% of RBC's annual pre-tax income.
-If RBC acquires POP,then the NPV of POP tax loss carryforwards to RBC is closest to:

• A)$53 million.
• B)$236 million.
• C)$262 million.
• D)$320 million.

Understand financial flexibility and the means a company has at its disposal to raise more funds.

Realize that accounting is not an exact science and the implications of this on financial report usability.

Recognize the significance of trends and relationships derived from financial statements for evaluating a company’s economic opportunities and risks.

Appreciate the multifaceted uses of financial statements by a range of stakeholders, from regulators to taxing authorities and loan issuance.

---

Definitions:

Anger

A strong feeling of displeasure or hostility, typically arising from a perceived wrong or threat.

Heart Attack

A medical condition characterized by the death of heart muscle due to the sudden blockage of a coronary artery.

Having A TV

The state or condition of owning and likely using a television set for entertainment, information, or education.

Having A Car

The state or condition of owning or possessing a vehicle for personal transportation.