I need help with the following questions attached below. I also attached what I've started I'm not sure if I'm even on the right track. Any assistance will be greatly appreciated.

T&S Oil Company has $20 Million allocated to capital in 2017; they have three proposals that the engineers have brought forward.The company evaluates all projects on a 10% discount rate. Assume all cash is spent or received at the end of each year.The forecasted economic assumptions are below:

Project 1:

The company economist expects that prices will stay at $45/barrel and uses this price for the base case to evaluate all projects.The tax jurisdiction where the wells will be drilled allows you to deduct all cash capital and expenses in the year of spend.The effective tax rate for production and income taxes is 40%.

Project 2:

The tax jurisdiction where the wells will be drilled allows you to deduct all cash capital and expenses in the year of spend (cash savings become taxable in the year of spend).The effective tax rate for production and income taxes is 40%.

Project 3:

Same price and tax assumptions as Project 1.

Part 1:

The CFO has asked your team to review the proposals and provide a recommendation including financial justification (measures of merit) as to which project you will choose.

Part 2:

In your meeting with the CFO, you are asked the following ? Please provide your answers:

What sensitivity analysis did you conduct?What were your results? How did this impact your decision?

Does it change your recommendation if the discount rate is 8%? 16%?

The local tax jurisdiction has a budget shortfall and is attempting to increase oil tax.They are proposing a 10% increase to the effective tax rate tax rate for projects 1 & 3 from 40% to 50%.Will that change your decision?

0.1 Volume Price Revenue Cost Capital Before Tax Tax Rate Tax After Tax Discount Rate Discounted Cash Flow 1 2017 20000000 -20000000 0.4 -8000000 -12000000 2 2018 220000 45 9900000 700000 9200000 0.4 3680000 5520000 3 2019 165000 45 7425000 700000 4 2020 124000 45 5580000 700000 5 2021 93000 45 4185000 700000 0.4 0.4 0.4 6 2022 70000 45 3150000 650000 7 2023 53000 45 2385000 600000 2024 40000 45 1800000 550000 2025 30000 45 1350000 500000 0.4 0.4 0.4 0.4 2026 2027 23000 17000 45 45 1035000 0.82644628 450000 400000 0.4 0.4 2028 13000 45 350000 0.4 2029 10000 45 2030 8000 45 300000 250000 0.4 0.4 The following project is due April 19th at the start of class. You may e-mail your project to me, but please also have a printed copy for me. Each group will present their results to the class on April 19th. This is a formal submission (All submissions should be typed). Include all names of group on submission. Only one paper per group please. Weight will be given to thoughtful responses. Project is worth 100 pts. T&S Oil Company has $20 Million allocated to capital in 2017; they have three proposals that the engineers have brought forward. The company evaluates all projects on a 10% discount rate. Assume all cash is spent or received at the end of each year. The forecasted economic assumptions are below: Project 1: Drilling Engineers propose a new drilling program that will drill 10 new wells in an existing field. Below are the most likely results. The company economist expects that prices will stay at $45/barrel and uses this price for the base case to evaluate all projects. The tax jurisdiction where the wells will be drilled allows you to deduct all cash capital and expenses in the year of spend. The effective tax rate for production and income taxes is 40%. Project 2: The production facility has identified a new process that will cut costs on processing oil for the next 10 years by $3,850K/year. Below are the most likely results. The tax jurisdiction where the wells will be drilled allows you to deduct all cash capital and expenses in the year of spend (cash savings become taxable in the year of spend). The effective tax rate for production and income taxes is 40%. Project 3: Explorations Engineers propose drilling 4 new wells for $5 Million each in a new development. The engineers give each well a 25% chance of success. All capital will have to be spent, production and operating expenses will be risked at 25%. Same price and tax assumptions as Project 1. Part 1: The CFO has asked your team to review the proposals and provide a recommendation including financial justification (measures of merit) as to which project you will choose. Part 2: In your meeting with the CFO, you are asked the following - Please provide your answers: What sensitivity analysis did you conduct? What were your results? How did this impact your decision? Does it change your recommendation if the discount rate is 8%? 16%? The local tax jurisdiction has a budget shortfall and is attempting to increase oil tax. They are proposing a 10% increase to the effective tax rate tax rate for projects 1 & 3 from 40% to 50%. Will that change your decision