2. Development of a natural gas property is projected to involve production, costs, and prices as follows with costs expressed in thousands of dollars and production and price in units as noted, msf = thousand cubic feet, mmscf= million cubic feet, and m$ = thousands of dollars.

Year	0	1	2	3	4
Production, mmscf/yr		300	700	500	150
Price, $/mcf		5.00	5.25	5.50	5.75
Royalties, % of gross Revenue		12.5%	12.5%	12.5%	12.5%
Operating cost, m$		60	70	80	90
Intangible Well Cost, m$	1,000
Tangible Well Cost, m$	700
Tangible Pipeline Cost, m$	450
Mineral Acquisition Cost	2,000

(a) Calculate annual before-tax cash flow and then determine the project NPV for a 15% minimum rate of return. Assume the investor has a 100% working interest in the property, and the salvage value is 0.

(b) Calculate ROR, PI and GRR.