Sinochem is a natural gas exploration company with operations in China. Suppose the company currently is exploring in some area of Sichuan province, which has a possibility 20% containing a natural gas reserve worth 1 billion dollars. However, the cost of drill a well to mine the reserve is 300 million dollars. (a) What is the expected profit of conducting the drill? Should the company do it? (5 points) Sinochem could use seismic surveys to learn more about the area's underground formations. Based on history, the company knows that if the seismic readings are favorable, gas will more likely be discovered than if the seismic readings are not favorable. However, the readings are not perfect indicators. If there is a gas reserve, there is 25% probability the seismic readings are favorable. If there is no gas reserve, there is 5% chance that the readings are favorable. The cost of doing a seismic survey is 10 million dollars. (b) Should Sinochem do a seismic survey? What is the expected profit, considering the survey cost? (5 points) (c) Suppose the result of each seismic survey is independent from another survey. If the first survey result is unfavorable, should Sinochem do the second survey? (5 points)