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Petroleum Inc. owns a lease to extract crude oil from sea. It is considering the construction of a deep-sea oil rig at a cost of

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Petroleum Inc. owns a lease to extract crude oil from sea. It is considering the construction of a deep-sea oil rig at a cost of $50 million (10) and is expected to remain constant. The price of oil P is 540/bbl and the extraction costs are $25/bbl. The quantity of oil Q=300,000bbl per year forever. The risk.free rate is 6%6 per year and that is also the cost of capital (ignore taxes). Suppose the oil price is uncertain and can be $50/bbl or $30/bbl next year, then expected NPY of the project if postponed by one year is: None of the above B) $25 million $35.4 million $25 million

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