Calculate After-Tax Cash Flow, NPV (minimum ROR=20%) and ROR for the following investment with a 6-year lifetime:

The investor is a non-integrated oil company.

The total producible oil in the reserve is estimated to be 2,400,000 barrels.

The production rate will be 400,000 barrels of oil per year from year 1 to year 6.

The mining rights acquisition cost for the property would be $1,600,000 at zero time.

Intangible drilling cost (IDC) expected to be $7 million at zero time

Tangible equipment cost is $3,000,000 at zero instant $1,500,000 in working capital at zero time

Equipment depreciation will be based on MACRS 5-year life depreciation from year 1 to year 6 

The production selling price is assumed to be $45 per barrel, increasing 10% each year from year 2.

The operating cost is $1,500,000 per year and there is a 10% increase from year 2.

Income tax 40%

Copyright 15%