A$1.$ Which statement is correct about depreciation?

All costs are subject to depreciation

Capital costs are depreciated

Cost escalation is the same as depreciation

Depreciation is an accounting measure and has no effect on project economics and decision making

A$2.$ Three partner companies are considering developing a giant gas field. To avoid future confusion, in a partner meeting all three companies decided to share their economic assumptions $($shown below$).$ Which company is more likely to produce higher valuation of the gas field?

$\backslash$table$[[,$Companies$],[,$Scallop Oil,Conpoy Petroleum,Salgado International$],[$Gas Price $($Real$),4$ USD$/$MMBtu$,3$ USD$/$MMBtu$,4$ USD$/$MMBtu$],[$Real Discount Rate,$8\%,8\%,10\%],[$Inflation Rate,$6\%,5\%,2\%]]$

Scallop Oil

Conpoy Petroleum

Salgado International

Not enough information: we need information about costs and production at the least

A$3.$ A sidetrack well will penetrate an oil$-$bearing formation and hopefully generate an expected revenue of $$200$ million. The incremental cost of this sidetrack is $$150$ million $($all figures are in present value$).$ As there is $20\%$ chance of failure, your managers have consulted a service company that collects high quality $3$D seismic information. What is the maximum you should pay for seismic information?

The information is worthless in this project

$$50$ million

$$30$ million

$$10$ million