Jai Limited is in process of acquiring Sandesh Limited. Sandesh Limited has accumulated losses of Rs. 1000 crores which can be set off for period of next 4 years against profits of Jai limited post acquisition. The details of projected taxable profits of Jai limited for next 4 years are as follows.
|
Year 1 (Rs. crores) |
Year 2 (Rs. crores) |
Year 3 (Rs. crores) |
Year 4 (Rs. crores) |
|
150 |
300 |
350 |
450 |
The tax rate to be considered is 30%. The cost of capital (discount rate) is at 15%. Please compute the potential tax savings / shield Jai limited will be able to derive out of this acquisition and the estimated acquisition price which you would recommend to the Board of Jai Limited. The discount values are provided as under.
|
Year 1 |
Year 2 |
Year 3 |
Year4 |
|
0.870 |
0.756 |
0.658 |
0.572 |
please solve it
CAclubindia
