Calculate the After-Tax Cash Flow, ROR, and NPV (at minimum ROR = 12

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. 70 percent of these costs can be expensed, while the remaining 30 percent are amortized. Amortization of IDC starts from 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) . Page 1 of 2 • For depletion cost calculations, amortize the Mineral rights acquisition cost equally over 6 years.