Problem 1 (40 pts): An asset for drilling was purchased and placed in service by a petroleum production company. Its cost basis is $60,000, and it has an estimated SV of $12,000 at the end of an estimated useful life of 10 years. During the depreciable life, it is estimated the firm will save $16,000 per year after all the costs of owning and operating the asset have been paid. Assume an Effective Income Tax Rate of 0.3 and an After-tax MARR of 10%. a) Compute the depreciation and the BV at the end of each year of life by (i) SL and (ii) 200% DB. b) For each of the two depreciation systems, conduct an After-Tax Cash Flow Analysis and use the PW and IRR methods to determine whether the project is economically attractive. (slove with excel sheet)

Problem 1 (40 pts): An asset for drilling was purchased and placed in service by a petroleum production company. Its cost basis is $60,000, and it has an estimated SV of $12,000 at the end of an estimated useful life of 10 years. During the depreciable life, it is estimated the firm will save $16,000 per year after all the costs of owning and operating the asset have been paid. Assume an Effective Income Tax Rate of 0.3 and an After-tax MARR of 10%. a) Compute the depreciation and the BV at the end of each year of life by (i) SL and (ii) 200\% DB. b) For each of the two depreciation systems, conduct an After-Tax Cash Flow Analysis and use the PW and IRR methods to determine whether the project is economically attractive