Great Deal! Get Instant $10 FREE in Account on First Order + 10% Cashback on Every Order Order Now

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...

1 answer below »
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
Answered Same Day Dec 29, 2021

Solution

David answered on Dec 29 2021
105 Votes
An oil company purchased a new oil drilling rig for $325,000. A special tax law allows the company to
ecapture 80% of the initial cost of the rig over a 10 year period using straight line depreciation. The
company’s tax
acket 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....
SOLUTION.PDF

Answer To This Question Is Available To Download

Related Questions & Answers

More Questions »

Submit New Assignment

Copy and Paste Your Assignment Here