An Existing Well Is Operating and the Price of Oil

question 15

Multiple Choice

An existing well is operating and the price of oil is $115 per barrel.The effective lease rate and risk free rate are 3.0% and 4.0%,respectively.The constant cost of extraction is $85 per barrel and the volatility of prices is 15.0%.If it costs nothing to shut down the well,at what price would we close the well?

• A) $41
• B) $48
• C) $52
• D) $59

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Definitions:

Limited Financial Resources

A situation where there is an insufficient amount of money available to meet basic needs or to invest in desired activities or items.

Risk for Family Violence

The likelihood or potential for occurrences of aggressive or abusive behavior within a family unit.

Unemployed Husband

A situation where a married man is currently without employment, affecting the household's dynamics and income.

Developmentally Delayed Child

A child who does not reach developmental milestones at the expected times, which may affect physical, intellectual, or emotional growth.