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TABLE 2 . 6 OIL INVESTMENT DETAILS table [ [ Year , table [ [ Barrels ] , [ produced ] ] ,
TABLE OIL INVESTMENT DETAILS tableYeartableBarrelsproducedtableGrossrevenuetableNetincomeOption Option tableDepletionallowancetableTaxableincomeTax,tableAftertaxIncome A depletion allowance, for tax purposes, can be computed in either of two ways each year: of gross revenue up to of net income before such deduction option or the investment cost of the product, equal in this case to the unit cost of the reserves, $ per barrel option The allowance is deducted from the net income to determine the taxable income. The investor is in the tax bracket. a Complete Table and show that the total depletion allowance exceeds the original investment. b Calculate the PV and the IRR for this investment. Assume an interest rate of
TABLE OIL INVESTMENT DETAILS
tableYeartableBarrelsproducedtableGrossrevenuetableNetincomeOption Option tableDepletionallowancetableTaxableincomeTax,tableAftertaxIncome
A depletion allowance, for tax purposes, can be computed in either of two ways each year: of gross revenue up to of net income before such deduction option or the investment cost of the product, equal in this case to the unit cost of the reserves, $ per barrel option The allowance is deducted from the net income to determine the taxable income. The investor is in the tax bracket.
a Complete Table and show that the total depletion allowance exceeds the original investment.
b Calculate the PV and the IRR for this investment. Assume an interest rate of
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