WesternGear.com is expected to have operating losses of \(\$ 200,000\) in its first year of business and \(\$ 75,000\) in its second year. However, the company expects to have income before taxes of \(\$ 250,000\) in its third year and \(\$ 400,000\) in its fourth year. The company's required rate of return is 12 percent.

Required

Assume a tax rate of 40 percent and that current losses can be used to offset taxable income in future years. What is the present value of tax savings related to the operating losses in years one and two?