In this model to value tax losses, we've got five years of future EBIT figures, each of them being 100. If we look at our tax losses at the start of this period, we can see we start with 400. So let's start modeling this out and then we'll start valuing them. So my beginning figure is the ending from last period and now I need to work out how much of that 400 losses we can use? Well, I'm gonna use the minus min function to help me out here. I'm gonna take the minus min of the 400 and the 100, i.e., I'm gonna use 100 of my 400 against EBIT.

100 is used up. And if I SUM at the bottom there, that tells me that I now end up with 300 of losses to carry forward. As I copy them to the right, in year two, I end up with 200. Year three, I end up with 100. And in year four, I've now used them all up. In year five, we'll see if we've modeled it correctly, it should stay at zero, and it does. Now that's the losses being used up. We can see it's 100 in every period. What's the tax benefit from this? Well, I know that my profits have reduced by 100. That means that the tax benefit will be with 100 times by 30%. I'm gonna lock onto that. Also, the 100 is shown as a negative. I want to flip that to a positive. So I've put a negative sign at the beginning. Fantastic. So my tax benefit is going to be 30 in years one to four, and then the final period, there's no tax benefit. It's these figures that I want to value. So here's my discount rate given to me of 10%. I want to find the present value of them and I'm going to use the NPV formula to help me out. That asks me, what rate do you want to use? It's gonna be 10%. And it then asks me, what values do you want to discount? I want to discount those tax benefit from losses, getting me a present value of tax losses of 95.1. Let's now see how that impacts our EV equity bridge. I've got an EV calculated already at 500. I'm going to add on any financial assets, such as tax losses, subtract debt to then get me to equity. So let's fill in that financial assets, 95.1, and my equity is EV plus the financial assets subtract the debt. Now let's just play around with that discount rate slightly. At the moment, it's 10%. Let's assume that's the cost of equity. But let's say we instead wanted to use a cost of debt, something much lower, maybe 4 or 5%. Let's see what impact that has on the equity. At the moment, it's 575.1. If I had a company, I'd have to spend that amount of money to buy out the equity, but if I changed the discount rates, it goes up to 586.4.

So that has more value to me, and this is gonna be a source of negotiation between two parties in a transaction.