Part I

Part II

A shale oil production project will cost $300,000 upfront but generate $70,000 at the end of each year for the first 4 years, and $30,000 at the end of each year in the following 3 years. No value will remain after that. Calculate the net present value of the project at 5% annual opportunity cost of capital. less than -$20,000 - at least -$20,000, but less than $10,000 at least -$10,000, but less than $0 at least $0, but less than $10,000 at least $10,000, but less than $20,000 O at least $20,000 Calculate the internal rate of return of the above project. (Ignore 5% opportunity cost of capital in the last question.) less than 4.5% at least 4.5%, but less than 5% at least 5%, but less than 6% at least 6% but less than 6.5% at least 6.5% but less than 7% at least 7%