Table A-1. 3-, 5-, 7-, 10-, 15-, and 20-Year Property Half-Year Convention Depreciation rate for recovery period Year 3-year 5-year 7-year 10-year 15-year 20-year 33.33% 44.45 14.81 20.00% 32.00 19.20 11.52 11.52 14.29% 24.49 17.49 12.49 8.93 10.00% 18.00 14.40 11.52 9.22 5.00% 9.50 8.55 7.70 6.93 3.750% 7.219 6.677 6.177 5.713 7.41 5.76 8.92 8.93 4.46 7.37 6.55 6.55 6.56 6.55 6.23 5.90 5.90 5.91 5.90 5.285 4.888 4.522 4.462 4.461 3.28 5.91 5.90 5.91 4.462 4.461 4.462 4.461 4.462 5.90 5.91 2.95 4.461 4.462 4.461 4.462 4.461 2.231 Question 4 (40 points): Calculate the After-Tax Cash Flow, ROR, and NPV (at minimum ROR = 12.5%, after tax) for the following investment with 6-year project life time and a Corporate Tax Rate of 21%: The investor is an Integrated Petroleum Company Total producible oil in the reserve is estimated to be 3,000,000 barrels 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 $2,500,000 at time zero Intangible drilling cost (IDC) is expected to be $15,000,000 at time zero Tangible equipment cost is $10,000,000 at time zero Working capital of $1,500,000 also at time zero Equipment depreciation will be based on MACRS 5-years life depreciation starting from year 1 to year 6 (consider rates from table A-1 for 5-years with half-year convention) The oil price is $60 per barrel which has 2% escalation each year starting from year 0 Operating cost is $2,000,000 annually with an escalation rate of 5% starting from year 0 Environmental OPEX (Year 6), $2,000,000 escalated 5% starting from year 0 Royalty 12.5% (1/8 Royalty) For depletion cost calculations, amortize the Mineral rights acquisition cost equally over 6 years