Present Value Tables Needed for This Question

question 7

Essay

Present Value Tables needed for this question. Tony is the sole shareholder of Create Corporation. Tony is a chemical engineer and has been working hard to create a unique product but has been unsuccessful. Thus, Create has accumulated an NOL of $240,000. This year she finally finds the right combination for a new cleaning product.
​
Predicting that Create will be very profitable next year, Create borrows $250,000 to pay Tony the salary she rightly deserves. Next year, Create does become profitable, earning $100,000 before application of carryovers. Mega Corporation, a huge ($50 million value, 35% tax bracket) competitor, offers to purchase the patent from Tony for $750,000.
​
Knowing that the Create's NOL should be useful to Mega, Tony suggests a restructuring where she receives $500,000 in Mega stock, Mega assumes all of Create's liabilities ($250,000), plus $75,000 cash for the NOL. Mega counter offers with cash for the NOL (to be determined), and $750,000 of stock. It will not assume any liabilities. How much would be the maximum cash offered by Mega for the NOL, assuming that Mega uses an 11% discount factor and the Federal long-term tax-exempt rate is 4%? If Tony accepts Mega's offer, what type of reorganization, if any, is this restructuring?

---

Definitions:

Frustration

An emotional response to opposition, related to anger and disappointment, that arises from the perceived resistance to the fulfillment of an individual's will or goal.

Coping Abilities

An individual's psychological and behavioral capacities to manage stress and adversity.

Tax

A compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Stress

The body's response to any demand or challenge, which can be physical, mental, or emotional.