7. Tadpole Oil and Gas Company completes construction of an offshore oil platform and places it into service on January 1, 2018. Tadpole is legally required to dismantle and remove the platform at the end of its useful life, which is estimated to be 10 years. On January 1, 2018, Tadpole recognized a liability for an asset retirement obligation and capitalized an amount for an asset retirement cost. It estimated the initial fair value of the liability using an expected present value technique. The significant assumptions used in that estimate of fair value are as follows.

d. A contractor would typically demand and receive a premium (market risk premium) for bearing the uncertainty and unforeseeable circumstances inherent in locking in todays price for a project that will not occur for 10 years. The entity estimates the amount of that premium to be 5% of the estimated inflation-adjusted cash flows.