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

---

Definitions:

Cash Payments

Financial activities that result in the spending of cash to fulfill debts or acquire products and services.

Bank Reconciliation

The process of matching and comparing figures from accounting records against those shown on a bank statement to ensure they are in agreement.

Journal Entries

Records that document financial transactions in an accounting system, indicating the accounts and amounts to be debited and credited.

Bank Memos

Bank memos are notes or records created by a bank to document adjustments made to a bank account, explaining any changes or transactions.