Associated costs including drilling equipment

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Reference no: EM131913376

AsifCo has natural gas fields located in several counties in rural Oklahoma. AsifCo has two proposals for removing the natural gas, each costing $10 million for all associated costs including drilling equipment, labor, and transportation to the market. In Plan A, all the natural gas will be extracted within one year generating an expected year end cash flow of $12 million. Plan B takes longer to extract the gas and generates cash flows of $1,750,000 per year for the next 20 years. AsifCo has a hurdle rate of 12%. Which way should AsifCo go and why?

You will need to answer the question as if you were providing advice to senior management. I expect a short paragraph clearly stating your recommendation/results and how you reached the conclusion.

Reference no: EM131913376

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