Calculate the after-tax cash flow

Assignment Help Financial Management
Reference no: EM13910911

Calculate the After-Tax Cash Flow, NPV (at minimum ROR=20%) and ROR for the following investment:

The investor is a Non-integrated petroleum company

Total producible oil in the reserve is estimated to be 2,400,000 barrel

Production rate will be 300,000 barrel of oil per year from year 1 to year 8

Mineral rights acquisition cost for property would be $1,600,000 at time zero

Intangible drilling cost (IDC) is expected to be $7,000,000 at time zero

Tangible equipment cost is $4,000,000 at time zero

Working capital of $1,500,000 also at time zero

Equipment depreciation will be based on MACRS 7-years life depreciation starting from year 1 to year 8 (consider rates exactly similar to the table A-1 for 7-years half-year convention)

The production selling price is assumed $50 per barrel which has 10% escalation each year applicable from year 2

Operating cost is $1,500,000 annually with escalation rate of 10% starting from year 2

Income tax is 40%

Reference no: EM13910911

Questions Cloud

Beta of the common stock of an unlevered firm : Comparing two otherwise equal firms, the beta of the common stock of a levered firm is ____________ than the beta of the common stock of an unlevered firm.
What are some of the advantages of video conferencing : What are some of the advantages of video conferencing? Describe a recent meeting you attended that could have been conducted using video conferencing.
Capital budgeting project analysis and evaluation : Capital Budgeting Project Analysis and Evaluation: Explain the difference between depreciation as calculated on the income statement and depreciation as calculated for taxes. What is the cash effect of each?
Calculate DCFROR and NPV project life : Consider an investment of $500,000 at time zero for machinery and equipment to be depreciated using 8 year straight line depreciation starting in year 1 to year 8. Salvage value of the machinery and equipment is expected to be zero. The minimum DCFRO..
Calculate the after-tax cash flow : Calculate the After-Tax Cash Flow, NPV (at minimum ROR=20%) and ROR for the following investment: The investor is a Non-integrated petroleum company. Total producible oil in the reserve is estimated to be 2,400,000 barrel
What distinguishes 3g from 4g communications : What distinguishes 3G from 4G communications? Identify three 4G communications standards.
When will the firms value be maximized : When choosing a capital structure, when will the firm's value be maximized?
Distributed to expendable funds entire income earned : The Nebraska Institute of Science (NIS) pools all of its endowment funds so that it can obtain the benefits of a large and diverse investment portfolio. Suppose NIS charged depreciation and distributed to expendable funds the entire ‘‘income’’ earned..
What is one of the key advantages of such a network : What is a wireless mesh network? What is one of the key advantages of such a network?

Reviews

Write a Review

 

Financial Management Questions & Answers

  Idealize an appropriate business entity and develop a

idealize an appropriate business entity and develop a 10-page business plan. the business plan should cover all aspects

  What was your total real return on investment

You bought one of Great White Shark Repellant Co.’s 6.2 percent coupon bonds one year ago for $1,038. These bonds make annual payments and mature 15 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is..

  Calculate the future value of both the ordinary annuity

After careful review of your maintenance log, you also realized that you will need to replace a fence post molding machine that sells for $40,000.00. Calculate the future value of both the ordinary annuity and the annuity due options being offered by..

  Imperfect capital markets makes the total value

The presence of ____________imperfect capital markets makes the total value of the firm independent of its capital structure under the NOI approach. a) Arbitraje b) taxes, c) institutional investors, d) bankruptcy

  NPV of the project and should you pursue the project

A business opportunity has presented itself to you and one of your classmates. Your opportunity is to enter the fast growing craft beer industry. Your projected sale in the first year is 7500 kegs. Your projected growth rate is 5 percent. Entering th..

  Describe the concept of market efficiency

Describe the concept of market efficiency. In what sense is the concept an important part of the shareholders wealth maximization objective.

  The discussion board db is part of the core of online

the discussion board db is part of the core of online learning. classroom discussion in an online environment requires

  Parallel shift in the corporate debt term structure

In December 1995 Boise Cascade’s stock had a beta of 0.95.The Treasury bill rate at the time was 5.8% and the Treasury bond rate was 6.4% The firm had debt outstanding of $1.7 billion and a market value of equity of $1.5 billion; Assume Boise Cascade..

  A financial planning organization

May an attorney allow a financial planning organization to refer its members to him for preparation of wills and trusts and accept payment of part or all of his fee from the organization?

  Calculate the yearly interest income of each bond

Calculate the yearly interest income of each bond on the basis of its coupn rate and the number of bonds that Mark could buy with his $20,000.

  Saving for retierment

Miley expects to receive the following payments: Year 1 = $50,000; Year 2 = $28,000; Year 3 = $12,000. All of this money will be saved for her retirement. If she can earn an average of 10.5 percent on her investments, how much will she have in her ac..

  The undergrounds has annual sales

The Underground's has annual sales of $1.46 million. The cost of goods sold is equal to 80 percent of sales. The firm has an average accounts receivable balance of $150,000 and an average accounts payable balance of $163,500. How many days on average..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd