Scary Airlines $($SA$)$ is a Canadian air freight and logistics firm with pre$-$

tax earnings of $$85$M in year $1$ and $$75$M in pre$-$tax earnings in year $2.$ SA

is assessed a $15$ percent tax rate on its first $$80$M of taxable income and

$30$ percent tax rate on earnings above $$80$M$.$ If SA hedges its exposure to

sudden changes in petroleum, it can fix its pre$-$tax earnings to equal $$80$M

in year $1$ and $$80$M in year $2.$ Demonstrate how hedging increases SA$$s cash

flows by comparing its taxes for both years with and without petroleum

hedging. For simplicity, you do not have to decrease the SA$$s earnings

for the cost of hedging.