Wyatt Oil Is Considering Drilling a New Self-Sustaining Oil Well

question 6

Multiple Choice

Wyatt Oil is considering drilling a new self-sustaining oil well at a cost of $1,000,000.This well will produce $100,000 worth of oil during the first year,but as oil is removed from the well the amount of oil produced will decline by 2%,per year forever.If Wyatt Oil's appropriate interest rate is 8%,then the NPV of this oil well is closest to:

• A)-$250,000.
• B)$0.
• C)$250,000.
• D)$1,000,000.

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Definitions:

Check Register

A record book or a spreadsheet where all written checks, cash transactions, and deposits are recorded.

Outstanding Deposit

A deposit that has been made to a bank account but not yet cleared or recognized in the bank's record system.

Check Register

A record used to keep track of checks written, deposits made, and current balance in a checking account.

Bank Statement

A document provided by a bank detailing the transactions in a depositor's account over a specific period.