Question 3 You friend went back to his engineering books and realized that he forgot to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Question 3 You friend went back to his engineering books and realized that he forgot to account for the growth rate of the well's production. He adjusted his model, and now he believes that the production of the well will steadily decline at a growth rate (g) of -23%. He sends you the graph below to give you an idea of the well's production over time. [Assume that the well will produce for 50 years.] Well's Annual Production Number of Barrel of Oil 4000 3000 2000 1000 0 0 10 20 Year 30 40 50 Question 3.1. (20 points) Using your friend's prediction of the well's growth, how much oil will the well produce in year 1, 2, 10, and 50? Question 3.2. (10 points) Now, assuming that the well production will grow at a rate of -23%, your friend is offering $280,000. Do you accept his offer? Assume that the bank is offering a saving account with a 6% interest rate compounded annually. Question 3.3. (20 points) Your friend wonders if instead of paying you in one large lump-sum payment, he could pay you in 10 equal annual payments. How much should he offer for you to be indifferent between receiving $280,000 today, and 10 equal annual payments starting today? Question 3 You friend went back to his engineering books and realized that he forgot to account for the growth rate of the well's production. He adjusted his model, and now he believes that the production of the well will steadily decline at a growth rate (g) of -23%. He sends you the graph below to give you an idea of the well's production over time. [Assume that the well will produce for 50 years.] Well's Annual Production Number of Barrel of Oil 4000 3000 2000 1000 0 0 10 20 Year 30 40 50 Question 3.1. (20 points) Using your friend's prediction of the well's growth, how much oil will the well produce in year 1, 2, 10, and 50? Question 3.2. (10 points) Now, assuming that the well production will grow at a rate of -23%, your friend is offering $280,000. Do you accept his offer? Assume that the bank is offering a saving account with a 6% interest rate compounded annually. Question 3.3. (20 points) Your friend wonders if instead of paying you in one large lump-sum payment, he could pay you in 10 equal annual payments. How much should he offer for you to be indifferent between receiving $280,000 today, and 10 equal annual payments starting today?
Expert Answer:
Answer rating: 100% (QA)
Question 31 To calculate the oil production in each year well use the formula for exponential decay Pt P0ert Where Pt is the production at time t P0 is the initial production r is the growth rate in d... View the full answer
Related Book For
Modern Systems Analysis And Design
ISBN: 9780134204925
8th Edition
Authors: Joseph Valacich, Joey George
Posted Date:
Students also viewed these finance questions
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
Calculate the directional derivative in the direction of v at the given point. Remember to use a unit vector in your directional derivative computation. g(x, y, z) = xe-y, v = (1, 1, 1), P = (1,2,0)
-
1. Find the future value of an ordinary annuity of $80 paid quarterly for 3 years, if the interest rate is 8%, compounded quarterly? 2. Find the future value of an ordinary annuity of $300 paid...
-
Gas streams containing hydrogen and nitrogen in different proportions are produced on request by blending gases from two feed tanks: Tank A (hydrogen mole fraction = x A ) and Tank B (hydrogen mole...
-
Predicting Delayed Flights. The file FlightDelays . jmp contains information on all commercial flights departing the Washington, DC area and arriving at New York during January 2004. For each flight...
-
The net income (after income tax) of McCants Inc. was $2 per common share in the latest year and $6 per common share for the preceding year. At the beginning of the latest year, the number of shares...
-
What is the value today of a money machine that will pay $ 2 , 5 5 2 . 0 0 every six months for 1 0 . 0 0 years? Assume the first payment is made six months from today and the interest rate is 1 0 ....
-
From the information in BE5.4, prepare the journal entries to record these transactions on McLeena Companys books under a perpetual inventory system. Data From BE 5.4 Prepare the journal entries to...
-
A string with a mass of 30.0 g and a length of 200 m is stretched under a tension of 70.0 N. How much power must be supplied to the string to generate a traveling wave that has a frequency of 50.0 Hz...
-
An increasingly significant sector of the hospitality and leisure industry is that of the cruise sector. In an evergrowing and continuallyevolving cruise industry, the delivery of a memorable...
-
What is the critical angle for total internal reflection for an optical fiber cable surrounded by air if the index of refraction is (a) 1. 4 and (b) 1. 8 ? (c) Which fiber could have a sharper bend...
-
It always strikes me as surprising, when talking to my peers at other companies, how many of them talk about the substantial time they have to spend lobbying their colleagues to take CSR seriously....
-
Asian members of staff can sometimes be considered over-subservient towards guests and appear to accept frivolous requests or complaints too readily. Guests used to this approach then seem quick to...
-
If youre still not sure where you fall on the introvertextrovert spectrum, you can assess yourself here. Answer each question true or false, choosing the answer that applies to you more often that...
-
A die is tossed thrice. If is the event and is the event, Determine whether the events are independent. Explain. In your own words, state your position on the assertion If two events and are...
-
What will be the final value of DI after executing the following piece of code? Execute the instructions dependently one after another. CLD MOU CX,OFOH MOU AX.02874H MOU DI,01000H MOU ES, DI SUB...
-
What is object-oriented analysis and design?
-
Describe the activities performed by the project manager during project planning.
-
Suppose you were responsible for establishing a help desk for users of Hoosier Burgers inventory control system (described in previous chapters). Which support system elements would you create to...
-
The solar system is like an atom in that both (a) are governed principally through the electric force. (b) consist of a central body surrounded by objects moving in elliptical paths. (c) are composed...
-
When a contracting hot ball of gas spins into a disk shape, it cools faster due to (a) increased radiation transfer. (b) increased surface area. (c) decreased insulation. (d) increased convection...
-
Compared to your weight on Earth, your weight on Jupiter would be about (a) 3000 times as much. (b) half as much. (c) 3 times as much. (d) 300 times as much. (e) 100 times as much.
Study smarter with the SolutionInn App