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.
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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.
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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?

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Definitions:

Machine-Hours

A measure of the amount of time machines are operated in the production of goods or services, used as a basis for allocating manufacturing costs.

Manufacturing Overhead

The indirect costs related to manufacturing, not including direct labor or materials, such as utility costs and maintenance expenses.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual products or job orders, based on a predetermined formula.

Machine-Hours

A measure of the time a machine is run during production, used to allocate manufacturing overhead costs based on machine usage.