Drilling Unlimited (DU) specializes in exploring for, drilling for, and producing natural gas in the newly-rediscovered shale deposits of PA and NY Review the following balance sheet for DU and note: GAAP rules for valuing natural gas reserves are considered inaccurate throughout the natural gas industry. "Proved and Probable" reserves, as estimated by a reliable engineering firm are the industry-standard measure for the amount of natural gas under a given piece of land. DU has sole development rights to 350 million (MM) cubic feet of reliably-estimated "Proved and Probable" natural gas in PA and NY. The rights could be sold today for at least $800MM. DU's "Other Current Assets" could be sold today for $400,000 and its "Other Long-term Assets" are worth $9,000,000. Find: An estimate for the value of DU, using the Balance-Sheet Valuation method. There is a 10% chance that PA and NY will forbid development of the fields for which DU has sole rights. (The technique for extracting gas from this geology is environmentally damaging). In this case, the market value of DU's equity would be zero. Using this knowledge and your answer to a) above, what is the weighted-average value of DU? The formula for weighted average is: (Probability of case 1 * case 1 value) + (Probability of case 2 case 2 value)