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An oil and gas company acquired the mineral rights to a project 2 years ago for a cost of $2 million dollars. Last year the company spent $0.4 million on geological and geophysical (G&G) expenditures. Today (time zero), the company wants you to analyze whether it is better economically to sell the rights to the property for $4.0 million cash now (at time zero), or whether it would be better to keep the property and develop using one of two drilling development scenarios for which projected before-tax cash flows are given on the following time diagrams. All dollar values are in millions of dollars.-2.0 -0.4 -12.5 8.0 5.0 4.0 3.0 3.0A)-2 -1 0 1 2 3 4 5
-2.0 -0.4 -9.0 7.0 4.0 2.5 2.5 0.0B) -2 -1 0 1 2 3 4 5
Use ROR analysis to determine whether it is better to sell the rights to the property today (time zero), or begin development using either the "A" or "B" scenarios. Assume the investor is seeking a nominal before-tax minimum ROR of 10%. Verify your ROR findings with NPV and PVR analyses. Then, compare the three options if the minimum ROR is raised to 20% reflecting the hurdle rate the company is currently imposing on projects.
Compute the discount factor 1/(1+r)^t for r=1, 5, or 10 perent interest rates and t=30 and 50 years. remember that 1 percent is .01. based on your computation, is teh choice of discount factor important for deciding whether to do somehtinga bout g..
Consider a firm subject to quarter-to-quarter variation in its sales. Suppose that the following equation was estimated using quarterly data for the period 2006-2013 (the time variable goes from 1 to 32). The variables D1, D2 and D3 are , respecti..
Spookmart and Scaretown are the only two halloween costume stores in town. Both the stores are wondering how many Miley Cyrus twerking costumes to order. Each costume costs $2 from the supplier (i.e., marginal cost for the stores is $2) and market..
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept 123034.4703 23311.13897 5.277926165 0.000358709 71094.01589 174974.9248 71094.01589 174974.9248 y 0.238078372 0.017797354 13.37717818 1.04516E-07 0.19842..
John Smith, C.E.O. of A.B.Co. is attempting to estimate the quantity of his product that will be demanded during April. At the current price of $20.00, A.B. Co. is selling 100,000 units per month. Mr. Smith has been informed th..
Suppose that the inverse demand for shale gas is given by p = 400 - 2q. The private marginal cost of producing shale gas is PMC = 100 + q. Suppose that in order to produce shale gas at the PMC given above, the oil and gas (O&G) companies (that pro..
Company A just paid a $3.00 dividend per share. The dividend is expected to grow at a 4% rate indefinitely. The beta of the stock of Company A is 1.5. The market risk premium is 8% and the risk-free rate is 3%. (a) What is the expected return on t..
WHAT FUTURE AMOUNT OF MONEY WILL BE ACCUMULATED 10 YEARS FROM NOW BY INVESTING $1000 NOW PLUS $2000 FIVE YEARS FROM NOW AT 6% INTEREST COMPOUNDED SEMI-ANNUALLY
Examine the charts and correlation tables. Do men or women pay (on average) higher rents? How can you tell?
If the t ratio for the slope of a simple linear regression equation is equal to 1.614 and the critical values of the t distribution at the 1% and 5% levels of significance, respectively are 3.499 and 2.365, then what is the slope
Find the Herfindahl index for an industry composed of (a)three firms-one with 70 percent of the market, and the other two with 20 and 10 percent of the market, respectively; (b) one firm with a 50 percent share of the market and 10 other equalsize..
In the late 1990s a growing number of economists argued that world policymakers were focusing too much on fighting inflation. The economists also argued that the technical level of potential output had risen. Show their argument using the AS/AD mo..
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