A small independent petroleum company paid $500,000 acquisition at year and development of $1,400,000 at time 0, the production start at year 1 with 200,000 BBL of oil from initial reserve of 1000,000 BBL with selling price $18 per BBL. Royalties are 16% of revenue. Operating cost are estimated to be $200,000 in year 1, and $250,000 in year2. The equipemt cost is estimated to be $1000,000 and allowable depreciation for 7 years using MACRS, %depletion is 15% and effective tax 40% with minimum DCFROR of 20% calculate CF for 0,1,2,DCFROR,and NPV

Answer rating: 100% (QA)

Acqusition Cost 500000 Development 1400000 Litre Rate Amount BBL Year 1 200000 18 3600000 Cost ... View the full answer