How do we calculate IRR with depreciated value of equipment over 10 years period?

Question

This is regarding a drilling rig we want to hire. The Contractor needs to invest $36 million for buying the new rig. Supposing 15% residual value remains after 10 years period then how do we calculate IRR and what is the significance of having 12% & 10% IRR. Contractor has shown following annual values in a table for 10 years - Revenue, cash cost, operating cash flow (Revenue-cash cost), Rig capex, Working Capital & cumulative cash flow (rig Capex+working capital - annual cash flow). These have been worked out for 10 years and rig capex reduces by 85% in 10 years time. Contractor has calculated IRR with these figures. But how is not known to us.
Your help in understanding this concept would be highly appreciated.

Answer 1

Way too complicated for an answer here, me thinks. Spend the cash for a good CPA or Comptroller.