Suppose you are CFO of Discovery, Inc., an oil drilling company. You are deciding to drill a well. The equipment requires an investment of $300 today. It is just as likely for the well to be a success as well as a failure. If the well is a success the present value of the successful payoff at time one is $575. If the well is unsuccessful the present value of the payoff at time one is $0. The discount rate is 10%. Answer the following:

A.) Should you drill the well?

B.) Assume that in one year you know whether the well is a success or a failure. If the well is a failure you can sell the equipment for $250. Should you drill the well? What is the value of the option?