A company with a 34% marginal income tax rate is considering an investment that is classified as 3-year property in the MACRS depreciation schedule. The investment has the estimated following benefits:
Year Before tax cash-flow
0 $-75,000
1 $10,000
2 $25,000
3 $50,000
4 $15,000
a) What is the income tax owed in year 3?
b) What is the estimated annual after-tax cash flow for year 4?