Business, 12.08.2020 08:01 jasminellenaee

You are the CEO of and oil company, and you are considering the prospect of acquiring an oil property. If you invest in developing the property, the Present Value of the future cash flows from the property is $81.2 million. However, the present value of the development costs required is $86 million. You do not have to start developing the property immediately, but the maximum you can wait is 6 years. If not developed after 6 years, your lease will expire. Once developed, however, the property is yours until the reserve is depleted. Interest rate is 8.24% per annum. You estimate that the volatility of crude oil prices is 41%. a. The real option to delay the development is out of the money
b. Since your lease is expiring in 6 years if not developed, you face significant cost of delay
c. The strike price of the real option is $81.2 million
d. You have enough information to calculate development lag

Answers: 1

Show answers

Another question on Business

Business, 22.06.2019 00:00

Which of the following is a disadvantage to choosing a sole proprietorship business structure? question 9 options: the owner has personal responsibility for the company's liabilities. the owner has to share the profits with partners. the owner is still liable for personal debts. the owner has to report to shareholders.

Answers: 1

Answer

Business, 22.06.2019 15:20

On january 2, 2018, bering co. disposes of a machine costing $34,100 with accumulated depreciation of $18,369. prepare the entries to record the disposal under each of the following separate assumptions. exercise 8-24a part 2 2. the machine is traded in for a newer machine having a $50,600 cash price. a $16,238 trade-in allowance is received, and the balance is paid in cash. assume the asset exchange has commercial substance.

Answers: 2

Answer

Business, 22.06.2019 19:20

This problem has been solved! see the answerwhich of the following statements is correct? the consumer price index is a measure of the overall level of prices, whereas the gdp deflator is not a measure of the overall level of prices. if, in the year 2011, the consumer price index has a value of 123.50, then the inflation rate for 2011 must be 23.50 percent. compared to the gdp deflator, the consumer price index is the more common gauge of inflation. the consumer price index and the gdp deflator reflect the goods and services bought by consumers equally well.

Answers: 2

Answer

Business, 22.06.2019 21:30

Which of the following best explains the purpose of protectionist trade policies such as tariffs and subsidies? a. they make sure that governments have enough money to pay for fiscal policies. b. they give foreign competitors access to new markets around the world. c. they allow producers to sell their products more cheaply than foreign competitors. d. they enable producers to purchase productive resources from everywhere in the world.

Answers: 1

Answer

You know the right answer?

You are the CEO of and oil company, and you are considering the prospect of acquiring an oil propert...

Questions