Use the Information for the Question(s)below

question 86

Multiple Choice

Use the information for the question(s) below.
Wildcat Drilling is an oil and gas exploration company that is currently operating two active oil fields with a market value of $200 million each.Unfortunately,Wildcat Drilling has $500 million in debt coming due at the end of the year.A large oil company has offered Wildcat drilling a highly speculative,but potentially very valuable,oil and gas lease in exchange for one of their active oil fields.If Wildcat accepts the trade,there is a 10% chance that Wildcat will discover a major new oil field that would be worth $1.2 billion,a 15% that Wildcat will discover a productive oil field that would be worth $600 million,and a 75% chance that Wildcat will not discover oil at all.
-What is the overall expected payoff to Wildcat from the speculative oil lease deal?

• A)$360 million
• B)$275 million
• C)$85 million
• D)$160 million

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Definitions:

Reasonably Safe

A term describing a status of products or environments that are considered to have acceptable levels of risk, adhering to standard safety guidelines.

Warning Defect

A lack or inadequacy in the instructions or notices that come with a product, which fail to alert users to potential risks.

Product Liability

The legal obligation of manufacturers, distributors, suppliers, and retailers to compensate for injury or damage caused by defective products.

Due Care

The level of judgment, attention, and diligence reasonably expected of a person under certain circumstances.