Question: 2) A well can be drilled and completed for an investment of $ 10x10 to yield the following cash flow: Year Production Revenue x106

2) A well can be drilled and completed for an investment of

2) A well can be drilled and completed for an investment of $ 10x10 to yield the following cash flow: Year Production Revenue x106 Expenses x10 $1000 1 600,000 $20 2 500,000 11 1060 3 300,000 8 1100 4 100,000 4 1300 5 40,000 1 1380 If a farmout opportunity exist whereby the investor would retain 30 % of the working interest after payout and no share until then, and the interest rate of 15%, estimate the present value of the incremental cash flow ?

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