Problem

Calculate the NPV of the wildcat oil well, taking account of the probability of a dry hole...

Calculate the NPV of the wildcat oil well, taking account of the probability of a dry hole, the shipping costs, the decline in production, and the forecasted increase in oil prices. How long does production have to continue for the well to be a positive-NPV investment? Ignore taxes and other possible complications.

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Solutions For Problems in Chapter 9