There is a 22% chance that the amount of oll in a prospective tield is 7...

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There is a 22% chance that the amount of oll in a prospective tield is 7 million barrols and a 78% chance of 15 million barrels. If the actual amount of ol is 7 million barrels, the present value of the cash flows from drilling will be $1 million. If the amount is 15 million barrels, the present value will be $9.5 million. The cost to dril the well is 54 million. Suppose, a test that costs $250,000 can verity the amount of oil under the ground, is it worth paying for the test? Please enter the full number as your answer. (Le., 10,000,000 and NOT 10 million) What is the net present value of not testing? Number What is the net present value of testing? Number Should the company perform the test to verily the amount of ol under the ground? Test O No Test There is a 22% chance that the amount of oll in a prospective tield is 7 million barrols and a 78% chance of 15 million barrels. If the actual amount of ol is 7 million barrels, the present value of the cash flows from drilling will be $1 million. If the amount is 15 million barrels, the present value will be $9.5 million. The cost to dril the well is 54 million. Suppose, a test that costs $250,000 can verity the amount of oil under the ground, is it worth paying for the test? Please enter the full number as your answer. (Le., 10,000,000 and NOT 10 million) What is the net present value of not testing? Number What is the net present value of testing? Number Should the company perform the test to verily the amount of ol under the ground? Test O No Test

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Answer page 1 Basiels probabi lity Psiesent value psiobable cash lows of cash f low I Mill... View the full answer