Good Gas Plc has recently discovered new oil reserves underneath the North Sea. If the

decision to drill is made, the company can produce and sell $50,000$ barrels of oil in one year$$s

time. The current market price of oil is $$50$ per barrel. The extraction cost is $$42$ per barrel. In

one year$$s time, the oil price can either be $$60$ or $$40.$ Future contracts on oil are available with

the expiration date exactly $1$ year from now at $$45$ per barrel. The risk free rate of interest in

the economy is $7\%.$

Required:

a$)$ Calculate the NPV of the project.