Use the Information for the Question(s)below

question 18

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% chance 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 expected payoff to debt holders with the speculative oil lease deal?

• A)$10 million
• B)$275 million
• C)$85 million
• D)$160 million

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Definitions:

Noradrenaline

Noradrenaline, also known as norepinephrine, is a neurotransmitter and hormone involved in the body's fight or flight response, regulating heart rate, blood pressure, and blood sugar.

Anhedonia

A condition characterized by the reduced ability to experience pleasure from activities usually found enjoyable, often associated with depression.

Reward System

A group of neural structures responsible for pleasure, learning processes, and motivation.

Androgens

A group of hormones that play a role in male traits and reproductive activity; testosterone is the most well-known androgen.