The Albatross Co

question 17

Multiple Choice

The Albatross Co. has accumulated net operating losses of $70 million and is likely to enter bankruptcy. The Zephyr Co. has earnings of $200 million and is in the 36% marginal tax bracket. Zephyr is considering buying Albatross and liquidating the company and retaining a few of the assets. What is the minimum value of Albatross to Zephyr?

• A) $25.2 million.
• B) $72.0 million.
• C) $70.0 million.
• D) not enough information to calculate.

---

Definitions:

Inductive Reactance

The opposition that inductance offers to alternating current, dependent on the frequency of the current.

Resistance

A measurement of the opposition to the flow of electric current, causing electrical energy to be converted into heat.

Apparent Power

The product of the current and voltage in an AC circuit, measured in volt-amperes, which may differ from the actual power due to phase differences.

Series RL Circuit

A type of electrical circuit that consists of a resistor (R) and an inductor (L) connected in series with each other.