Levels Tought:
Elementary,Middle School,High School,College,University,PHD
Teaching Since: | May 2017 |
Last Sign in: | 304 Weeks Ago, 6 Days Ago |
Questions Answered: | 66690 |
Tutorials Posted: | 66688 |
MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Taxes for a Merged Corporation
Consider two firms, Ying Corporation and Yang Corporation. Both corporations will either make $50 million or lose $20 million every year with equal probability. The only difference is that the firms’ profits are perfectly negatively correlated. That is, any year Yang Corporation earns $50 million, Ying Corporation loses $20 million, and vice versa. Assume that the corporate tax rate is 34%. What are the total expected after-tax profits of both firms when they are two separate firms? What are the expected after-tax profits if the two firms are combined into one corporation called Ying-Yang Corporation, but are run as two independent divisions? (Assume it is not possible to carry back or carry forward any losses.)
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