4. A petroleum project involves production of crude oilfrom a 5,000,000 barrel reserve. Time zero mineral rights acquisition cost (lease bonus) of$2,ooo,ooo isthe basis for cost depletion. Intangible drilling expenses of $1,500,000 will be incurred in time zero. Tangible producing equipment costing $3,000,000 attime zero will go into service in year one and be depreciated using double declining balance (on the 7-year depreciation basis considering first fullyear of use). Production is estimated to be 350,000 barrels peryear. Well-head crude oil value before transportation cost is estimated to be $42.00 per barrel in year one, $43.00 per barrel in year two, and $44.00 per barrel in year three. Royalties are 10.0% of revenues (well-head value) each year. Operating costs are expected to be $3,000,000 in year one, $3,300,000 inyeartwo, and $3,600,000 in year three. The allowable percentage depletion is 15.0%. The effective income tax rate is 40.0%. The investor has other taxable income against which to deduct negative taxable income (No Carry forward is ailowed). Determine the after-tax cash flows for years 0, 1, 2, and 3. Expense 100% of intangible drilling costs at the end of firstyear; Use the larger of percentage depletion (subject to limit miles) and cost depletion