Western Coal expects to produce 75,000 tons of coal annually for 15 years. The deposit cost $2M to acquire. The annual gross revenues are expected to be $8 per ton, and the net revenues are expected to be $3 per ton.
(a) Compute the annual depletion on a cost basis.
(b) Compute the annual depletion on a percentage basis. (Answer: cost = $133.3K, percentage = $60K)