There is a 50% chance that an oil field is rich and to produce up to...

 

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There is a 50% chance that an oil field is rich and to produce up to $8.0 million of oil, and a 50% chance not to be rich and to produce $2.0 million. It costs $3 million to produce oil regardless of the production level. We can spend $100,000 on a seismic test to verify the expected amount of oil level underground. We would like to investigate if it is worth to spend on this test. Use a decision tree to verify your answer. What is the profit if the oil field is rich? $ format) . . . What is the profit if the oil field is not rich? $ format) • What is the 'expected' profit (meaning considering the outcome probabilities) if we do not do the seismic test? $ million (enter a value in the x.x format) . million (enter a value in x.x million (enter a value in x.x What is the 'expected' profit if do the seismic test? Note that if the seismic test indicates that the oil field produces low levels, we can abandon the project. S (enter a value in x.x format) What is the value of the expected value of this seismic test? $ (enter a value in x.x format) • Is it worth to spend on this test (Y/N)? million million There is a 50% chance that an oil field is rich and to produce up to $8.0 million of oil, and a 50% chance not to be rich and to produce $2.0 million. It costs $3 million to produce oil regardless of the production level. We can spend $100,000 on a seismic test to verify the expected amount of oil level underground. We would like to investigate if it is worth to spend on this test. Use a decision tree to verify your answer. What is the profit if the oil field is rich? $ format) . . . What is the profit if the oil field is not rich? $ format) • What is the 'expected' profit (meaning considering the outcome probabilities) if we do not do the seismic test? $ million (enter a value in the x.x format) . million (enter a value in x.x million (enter a value in x.x What is the 'expected' profit if do the seismic test? Note that if the seismic test indicates that the oil field produces low levels, we can abandon the project. S (enter a value in x.x format) What is the value of the expected value of this seismic test? $ (enter a value in x.x format) • Is it worth to spend on this test (Y/N)? million million

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Profit if the oil field is rich Rich oil field produces up to 80 million of oil Profit Revenue Cost ... View the full answer