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r I • • 4. In 1951 (according to the Water Company’s rate application) Union Pacific and Water Company made a net profit of $51,061.99 from Union Pacific's pro-frerrtlUh facilities ($27,603.71) and from the Water Com­pany’s distribution facilities ($23,458.28). Rounding off the net profit to $50,000, Union Pacific would earn 2$ on the proposed purchase price of $2,500,000. Since 1941 Union Pacific Railroad Company has never earned less than 4$ on the net worth of its prop­erties and in many years has earned 7$ to 9$ thereon. Taking the 4$ figure, Union Pacific earns as much on $1 ,250,000 invested in its other properties as it does on $2,500,000 invested in its water properties; taking the 8$ figure, the respective amounts are $625,000 against $2,500,000. In other words, Union Pacific can afford to take a loss on the sale on its low revenue water facilities in order to get its money reinvested in its higher revenue properties. 5. Assuming the water facilities have a book value of $3,250,000, and Union Pacific sells for $2,500,000, for tax purposes Union Pacific will sustain a long term capital loss of $750,000. Assuming a 52$ corporation income tax, at least 26$ of the $750,000 8/S7jS&V loss (or approximately $375>000) can be recouped from income taxes. 9.