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What are the expected monetary values of the drill

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Reference no: EM132745112

Problem 1: An oil and gas company has to decide whether or not to drill a prospect. If it drills the engineers expect that the probability of a dry hole is 60% with a negative NPV of -$65,000, the probability of 60,000 barrels is 30% with a positive NPV of +$120,000 and the probability of 90,000 barrels is 10% with a positive NPV of +$180,000. What are the EMVs (expected monetary values) of the drill and don't drill options?

A. Drill $0; Don't Drill $15,000
B. Drill -$65,000; Don't Drill $0
C. Drill $15,000; Don't Drill -$65,000
D. Drill $15,000; Don't Drill $0

Reference no: EM132745112

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