1. Consider an offshore oil property with an estimated oil reserve of 50 million barrels of oil, where the present value of the development cost is $12 per barrel and the development lag is two years. The firm has the rights to exploit this reserve for the next twenty years and the marginal value per barrel of oil is $12 per barrel currently. Once developed, the net production revenue each year will be 5% of the value of the reserves. The riskless rate is 8% and the variance in In (oil prices) is 0.03. Use the Black Scholes formula to find the value of this reserve