A Company Is Considering Extracting Natural Gas from One of Its

question 4

Multiple Choice

A company is considering extracting natural gas from one of its properties. The initial extraction cost is $8 million, and all of the gas will be extracted in two years. The profits from selling the natural gas will be $6 million in year 1 and $5 million in year 2. What is the net present value of this investment at 12%?

• A) $2.5 million
• B) $1,343,112
• C) $800,780
• D) $1,020,645

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Definitions:

Social Contagion

The spread of ideas, attitudes, or behaviors through a group or society, mirroring the infectious process of a disease.

Norm

A standard or rule that is expected to be followed by members of a society, guiding behaviors and establishing expectations.

Role

The function or part played by a person or thing in a particular situation or context.

Peripheral Route Persuasion

A method of persuasion that relies on superficial cues or factors, such as attractiveness or celebrity endorsement, rather than logical argumentation.