How many years are left in the lives of petrobras

Reference no: EM132680154

Question 1: How many years are left in the lives of Petrobras' "Equipment and other assets," on average? State clearly any assumptions that you make in arriving at your estimate.

Question 2: Suppose that Petrobras assumes a zero salvage value for their "Equipment and other assets." For each $100 in new asset investments, what is the annual amount of depreciation expense charged to the income statement?

Question 3: Suppose that other leading energy companies charge $12 in depreciation expense for each $100 invested in new equip-ment. Are Petrobras' depreciation policy assumptions materi-ally different from those of their competitors? Support your answer.

Question 4: What line item on Petrobras' income statement is most affected by their depreciation policy? Explain why.

Question 5: Aside from comparing Petrobras' depreciation policy assump-tions to those of their competitors, what other "red flags" might one look for in order to assess whether Petrobras is overly con-servative or overly aggressive in taking depreciation expenses? Is there any evidence of these issues on Petrobras' financial statements?

Reference no: EM132680154

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