An oil-drilling company knows that it costs ($ 25,000) to sink a test well. If oil is

Question:

An oil-drilling company knows that it costs \(\$ 25,000\) to sink a test well. If oil is hit, the income for the drilling company will be \(\$ 425,000\). If only natural gas is hit, the income will be \(\$ 125,000\). If nothing is hit, there will be no income. If the probability of hitting oil is \(1 / 40\) and if the probability of hitting gas is \(1 / 20\), what is the expectation for the drilling company? Should the company sink the test well?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  answer-question
Question Posted: