12-4. It costs $780,000 to drill a natural gas well. Operating expenses will be 18% of the revenue from the sale of natural gas from this particular well.

If found, natural gas from a highly productive well will amount to 340,000 cubic feet per day. The probability of locating such a productive well, however, is about 15%. (12.4)

a. If natural gas sells for $9 per thousand cubic feet, what is the E(PW) of profit to the owner/operator of this well? The life of the well is 15 years and MARR is 12% per year.

b. Repeat Part

(a) when the life of the well is 10 years.

c. Perform one-at-a-time sensitivity analyses for ±20%

changes in daily well production and selling price of natural gas. Use a 10-year life for the well.