Petroleum Inc

question 6

Multiple Choice

Petroleum Inc. (PI) controls offshore oil leases. It is considering the construction of a deep-sea oil rig at a cost of $500 million. The price of oil is $100/bbl. and extraction costs are $50/bbl. PI expects costs to remain constant. The rig will produce an estimated 1,200,000 bbl. per year forever. The risk-free rate is 10 percent per year, which is also the cost of capital. (Ignore taxes) . Suppose that oil prices are uncertain and are equally likely to be $120/bbl. or $80/bbl. next year. Calculate today's NPV of the project if it were postponed by one year.

• A)+$100 million
• B)+$154 million
• C)+$170 million
• D)+$187 million

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Definitions:

Perceived Barriers

Obstacles that individuals believe exist between themselves and their goals, which can influence behavior and outcomes.

Perceived Susceptibility

An individual's belief or assessment about their risk of developing a health condition or disease.

Perceived Benefits

The personal or subjective advantages that an individual believes they will gain from engaging in a certain behavior or action, influencing their decision-making process.

Stage Theories

Psychological theories that describe human development and behavior as occurring in distinct stages, each with its own characteristics.