Sunshine Oil & Gas is considering an investment in Perfect Lease. Given the following information, calculate the payback period (in months). Should Sunshine invest in
Sunshine Oil & Gas is considering an investment in Perfect Lease. Given the following information, calculate the payback period (in months). Should Sunshine invest in Perfect Lease if management requires a payback period of less than 36 months?
| Acquisition cost of Perfect Lease | $60,000 |
| Drilling cost of one well | $450,000 |
| Estimated completion cost | $600,000 |
| Estimated selling price per bbl | $55 |
| Estimated lifting cost per bbl | $20 |
| State severance tax | 6% |
| Royalty interest | 10% |
| Estimated monthly production | 750 bbls per month |
Payback period (in months, rounded to two decimal places):
Based on payback, should Sunshine invest in Perfect Lease? (yes or no):
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Authors: David C Chan
2nd Edition
150081458X, 9781500814588
