What should the minimum price be the first year

Assignment Help Electrical Engineering

Reference no: EM131186665

Use Excel® to solve Problem 6.8 for leverage factors of 0.2 and 0.4.

Problem 6.8

The XYZ oil company owns several natural gas wells and is negotiating a 10-year contract to sell the gas from these wells to another company. They are negotiating on the price of the gas in the first year, in dollars per thousand cubic feet ($/MCF), including a 4% escalation clause. XYZ expects the wells to produce 33,000 MCF the first year and to decline at the rate of 15% every year thereafter. Operating costs are estimated to be $2/MCF and escalate at 3% per year. XYZ has agreed to spend $500,000 now to lay pipelines from each well to the second company's processing plant. What should the minimum price be the first year for this to be acceptable to XYZ? Assume an end-of-year convention and an MARR of 15%.

Reference no: EM131186665

Questions Cloud

Discuss the procedure and the legal requirements : BLAW 2006 COMPANY LAW FOR BUSINESS CASE STUDY. Discuss the procedure and the legal requirements that may have been required to be satisfied under the Corporations Act 2001 (Cth) to convert the company from Sparkle Pty Ltd to a public company

Write a paper assignment : Write a paper assignment. -- The topic is: JEAN PIAGET'S FOUR THEORETICAL APPROACHES IN DEVELOPMENT.

Determine true class boundaries and true class marks : The following values of Young's Modulus for a rubber compound (in 1000 lb/in 2) have been measured.

Design perspectives used in teradata : What are the different design perspectives used in Teradata?

What should the minimum price be the first year : Operating costs are estimated to be $2/MCF and escalate at 3% per year. XYZ has agreed to spend $500,000 now to lay pipelines from each well to the second company's processing plant. What should the minimum price be the first year for this to be a..

Outputs the average of values : Write an algorithm that gets as input three data values x,y, and z and outputs the average of these values if the value of x is positive. If the value of x is either 0 or negative, your algorithm should not compute the average but should print th..

Program using skip and take operators : Write a Program using Skip and Take operators. How can it beneficial for bulky data accessing on page?

Professional skills in information communication technology : What are IoTs and how are they currently being used - You should explore a range of applications of IoT,for example, in areas such as healthcare, manufacturing and production.

How increasing the investment tax credit given to firms : Analyze how increasing the investment tax credit given to firms that make expenditures on new capital affects the dispersion of earnings. (For a review of relevant concepts, see chapter 4.)

User Account

All Pages