× Didn't find what you were looking for? Ask a question
Top Posters
Since Sunday
g
3
3
2
J
2
p
2
m
2
h
2
s
2
r
2
d
2
l
2
a
2
Home Q & A Board Other Fields Homework Help Business Finance
New Topic  
Memphic Memphic
wrote...
Posts: 728
Rep: 0 0
6 years ago
Wyatt Oil is considering drilling a new oil well that is initially expected to produce oil at a rate of 10 million barrels per year. Wyatt has a long-term contract that allows them to sell the oil at a profit of $2.50 per barrel. The cost of drilling the rig is $175,000,000. If the rate of oil production from the rig declines by 3% over the year and the discount rate is 9% per year (EAR), then using continuous compounding, the NPV of this new oil well is closest to:
A) -$333,333,000
B) $28,128,000
C) $33,333,000
D) $39,340,000
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
Authors:
Read 71 times
1 Reply

Related Topics

Replies
wrote...
#1
6 years ago
D
Explanation:  D) rcc = ln(1 + .09) = .086178
gcc = ln(1 - .03) = -0.030459
NPV = -175,000,000 +   = 39,339,837
New Topic      
Quick Reply
Explore
Post your homework questions and get free online help from our incredible volunteers
  1128 People Browsing
 116 Signed Up Today
Start New Topic Take the Tour CoursesNew Study Tools Topics Trending Browse by Textbook
Live Chat
Related Images
  
 11763
  
 927
  
 686
Your Opinion
What's your favorite coffee beverage?
Votes: 274
Previous poll results: Do you believe in global warming?