Jet Black is an international conglomerate with a petroleum division and is currently competing in an auction to win the right to drill for crude oil on a large piece of land in one year. The current market price of crude oil is $106 per barrel and the land is believed to contain 464,000 barrels of oil. If found, the oil would cost $110 million to extract. Treasury bills that mature in one year yield a continuously compounded interest rate of 5 percent and the standard deviation of the returns on the price of crude oil is 60 percent.
Use the Black-Scholes model to calculate the maximum bid that the company should be willing to make at the auction.
Jet Black is an international conglomerate with a petroleum division and is currently competing in an...
OP23-5: Real Options and is currently competing in an auction to win the right to drill for crude oil on a large piece of land in one year. The current market price of crude oil is $58 per barrel, and the land is believed to contain 375,000 barrels of oil. If found, the oil would cost $35 million to extract. Treasury bills that mature in one year yield a continuously compounded interest rate of 4 percent, and the standard deviation...
I have this case study to solve. i want to ask which
type of case study in this like problem, evaluation or decision? if
its decision then what are the criterias and all?
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