18.3 Tax benefits and price Hahn Textiles has a tax loss carryforward of $800,000. Two firms are interested in acquiring Hahn for the tax loss advantage. Reilly Investment Group has expected earnings before taxes of $200,0o per year for each of the next seven years and a cost of capital of 15%. Webster Industries has expected earnings before taxes for the next 7 years as shown in the table below.

Webster Industries

Year Earnings before taxes

1 $80,000

2 120,000

3 200,000

4 300,000

5 400,000

6 400,000

7 500,000

Both Reilly