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please solve and show your work! There is a 32% chance that the amount of oll in a prospective field is 6 million barrols and
please solve and show your work!
There is a 32% chance that the amount of oll in a prospective field is 6 million barrols and a 68% chance of 15 million barrols. If the actual arnount of oil is 6 million barrels, the present value of the cash flows from driling will be $2 million. If the amount is 15 million barrels, the present value will be $7 milion. The cost to drill the well is $5 million. Suppose, a test that costs $450,000 can verily the amount of oll under the ground, is it worth paying for the lest? Please onter the full number as your answer. (i.e, 10,000,000 and NOT 10 million) What is the net present value of not testing? What is the net present value of testing? Should the company perform the tost to verily the amount of oll under the ground? Test No Test Step by Step Solution
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