Hi folks,
Can you please provide me with your opinion on my thought process:
- A Company incurs $100 in Asset write-down during acquisition.
Assuming tax rate 40%,
Assuming straight line depreciation over 10 years
Pro-forma Net Income for Acquirer would increase by +$6 due to $10 incremental decrease in depreciation expense pre-tax.
- A company incurs $100 in Asset write-up during acquisition.
Assuming tax rate 40%, economic life of 10 years with straight-line depreciation, then:
Pro-forma Net Income for Acquirer would drop by $6 due to $10 incremental increase in depreciation expense pre-tax.
I would be happy to have your feedback. thanks
peeps help!
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