Calculate the After-Tax Cash Flow, NPV (at minimum ROR=14%) and ROR for the following investment with 6 years life time:

The investor is a Non-integrated petroleum company

Total producible oil in the reserve is estimated to be 2,500,000 barrel

Production rate will be 500,000 barrel of oil per year from year 1 to year 6

Mineral rights acquisition cost for property would be $1,800,000 at time zero

Intangible drilling cost (IDC) is expected to be $7,500,000 at time zero

Tangible equipment cost is $4,000,000 at time zero

Working capital of $1,200,000 also at time zero

Equipment depreciation will be based on MACRS 5-years life depreciation starting from year 1 to year 6 (consider rates exactly similar to the table A-1 for 5-years half-year convention)

The production selling price is assumed $40 per barrel which has 10% escalation each year applicable from year 2

Operating cost is $2,000,000 annually with escalation rate of 12% starting from year 2

Income tax is 35%

Royalty 15%

Note: for depletion cost calculation you can amortize the Mineral rights acquisition cost equally over 6 years.