=+LG 1 LG 3 P18–3 Tax benefits and price Terna Group, one of the main electricity transmission grid operators in Europe, has a tax loss carryforward of €6,000,000. Two firms are interested in acquiring Terna for the tax loss advantage. Enel Group has expected earnings before taxes of €2,000,000 per year for each of the next 5 years, and a cost of capital of 9%. Eni S.p.A. has expected earnings before taxes for the next 5 years as shown in the following table.

Eni S.p.A.
Year Earnings before taxes 1 € 800,000 2 1,000,000 3 1,000,000 4 1,500,000 5 2,000,000