An offshore oil Company has discovered new oil reserves of 70 million barrels where the cost of developing these reserves is approximately $430 million. The company has the right to exploit these reserves for the next 20 years. The development lag is 3 years. The current price and production costs are $60/barrel and $30/barrel, respectively. The cost of delay is 4% p.a, the risk-free rate is 10% p.a; the variance in oil prices is 0.04. What is the current value of the underlying reserves net of the production cost if extracted today? (Hint: do not forget to take the development lag into consideration)

a. $4,800 million b. $2,400 million c. $2,100 million d. $1,866.9 million e. none of the above