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Well testing taking place before permanent well completion is referred to as drill stem testing. After a testing well drilled, a oil company has found
Well testing taking place before permanent well completion is referred to as drill stem testing. After a testing well drilled, a oil company has found that a permanent well will generate cash flow for $30 million per year for the next 5 years. The testing well costs $25 million to drill and the permanent well costs $100 million. The company's cost of capital is 15%. Should the company go ahead to drill a permanent well
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