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What is the expectation value of one million barrels

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Reference no: EM132523987

As a petroleum engineer in a company you are unsure on how much money could be made per each barrel of oil produced, as the oil price, production and transportation costs vary significantly. To account for this the aforementioned parameters have been defined in terms of probabilities;

  • 30% probability company could make $ 2 per bbl
  • 5% probability company could make $ 3 per bbl
  • 20% probability company could make $ 5 per bbl

Question a) What is the expectation value of 1 million barrels?

Reference no: EM132523987

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