Question #1. If an oil rig was built in a sea, the cost capitalized is likely to include cost of constructing the asset and the present value of the dismantling cost. If the assets costs $ 10 million to construct and would cost $4 million to remove over 20 years, then the present value of this dismantling cost must be calculated. If the interest rate were 5%

Calculate:

1. Present value of dismantling cost?
2. Total amount to be capitalized?
3. Depreciation charge per year?