An oil and gas producing company owns 42,000 acres of land in a southeastern state. it operates 630 wells which produce 18,000 barrels of oil per year and 1.7 million cubic feet of natural gas per year. the revenue from the oil is $1,800,000 per year and for natural gas the annual revenue is $581,000 per year. what bid should be made to purchase this property if the potential buyer is hoping to make 11% per year on his investment over a period of 9 years?

The bid amount should be $13,200,264.

Explanation:

An oil and gas producing company owns 42,000 acres of land in a southeastern state.

It operates 630 wells which produce 18,000 barrels of oil per year and 1.7 million cubic feet of natural gas per year.

The revenue from the oil is $1,800,000 per year and for natural gas the annual revenue is $581,000 per year.

Total Annual Revenue

= Revenue from oil + Revenue from gas

= $1,800,000 + $581,000

= $2,381,000

The bid amount should be the present worth of total annual revenue.

Present Worth of total annual revenue

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= $13,200,264