Target Company Has Incurred $5,000,000 in Losses During the Past

Essay

Target Company has incurred $5,000,000 in losses during the past 3 years; Acquiring Company anticipates pre-tax earnings of
$3,000,000 in each of the next 3 years. What is the difference between total taxes that would have been paid before the merger compared to actual taxes paid by the Acquiring Company after the merger assuming a marginal tax rate of 40 percent? Show your work.