1. Estimated costs for a proposed new 150,000 barrel per day petroleum refinery are described as follows, where all numbers given are in millions of dollars. At the beginning of

the project, land is purchased for $2. The FCIL is spent over a 5 year construction period, totaling $5,700, with$1,710 in year 1, $1140 in each of years 2-4, and $570 in year 5. Working capital is also spent in year 5, totaling $600. The plant starts up in year 6 with revenue of $2,185 per year and manufacturing costs of $1,100 per year. Depreciation could be done by a.) straight line depreciation over the class life of 16 years for a petroleum refinery or b.) the 10-years MACRS depreciation schedule. Analyze both options over the project life of 21 years. Assume salvage of$500 in year 21 is recoverable, in addition to land and working capital. Use an internal hurdle rate of 12% and a tax rate of 30%. (14 pts) Calculate all of the non-discounted and discounted profitability metrics. (5pts) Discuss the profitability of this project and give a recommendation to management about the feasibility of proceeding. (4pts) Discuss how these estimates might vary compared to actual prices over the life of the project. (4pts) Between depreciation options a and b, how do the ROI and IRR metrics compare? Why?