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1) A well can be drilled and completed for an investment of $ 10 10 6 to yield the following cash flow: Year Production Revenue
1) A well can be drilled and completed for an investment of $ 10 106 to yield the following cash flow:
| Year | Production | Revenue 106 | Expenses 103 |
| 1 | 600,000 | $20 | $1000 |
| 2 | 500,000 | 11 | 1060 |
| 3 | 300,000 | 8 | 1100 |
| 4 | 100,000 | 4 | 1300 |
| 5 | 40,000 | 1 | 1380 |
If a farmout opportunity exist whereby the investor would retain 30 % of the working interest after payout and no share until then, and the interest rate of 15%, estimate the present value of the incremental cash flow ?
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