An oil company purchased a new oil drilling rig for $325,000. A special tax law allows the company to recapture 80% of the initial cost of the rig over a 10 year period using straight line...

An oil company purchased a new oil drilling rig for $325,000. A special tax law allows the company to recapture 80% of the initial cost of the rig over a 10 year period using straight line depreciation. The company’s tax bracket is 50%. It has also computed its MARR at 12% per year. The following table provides the company’s anticipated yearly revenue and expenses. Note that the revenue and expenses are the same for years 3 through 10.

1. Compute the cash flows after taxes (CFAT) for years 1 through 10.
   
   


2. Determine whether the company exceeds its own MARR after taxes.

Year	Income	Expenses
0	$325,000
1	$120,000	$70,000
2	$140,000	$72,000
3-10	$210,000	$85,000

Please show all procedures for better clarification. Thanks



An oil company purchased a new oil drilling rig for $325,000. A special tax law allows the company to recapture 80% of the initial cost of the rig over a 10 year period using straight line depreciation. The company’s tax bracket is 50%. It has also computed its MARR at 12% per year. The following table provides the company’s anticipated yearly revenue and expenses. Note that the revenue and expenses are the same for years 3 through 10. a. Compute the cash flows after taxes (CFAT) for years 1 through 10. b. Determine whether the company exceeds its own MARR after taxes. Year Income Expenses 0 $325,000 1 $120,000 $70,000 2 $140,000 $72,000 3-10 $210,000 $85,000 Please show all procedures for better clarification. Thanks