1. Your midrange guess to the amount of oil in a prospective field is 10 million barrels, but in fact there is a 50% chance that the amount of oil is 15 million barrels and a 50% chance that it is 5 million barrels. If the amount is only 5 million then the present value of cash flows is $2 million. If the amount is 15 million barrels, the present value of cash flows will be $8 mill. IT costs $3 million to drill the well.
   1. Should you accept the project?
   2. IF a seismic tests which cost $200,000$ can verify the amount of oil, is it worth paying for the test?