An oil and gas producing company owns 48,000 acres of land in a southeastern state. It operates 700 wells which produce 21,000 barrels of oil per year and 1.5 million cubic feet of natural gas per year. The revenue from the oil is $2,100,000 per year and for natural gas the annual revenue is $588,000 per year. What bid should be made to purchase this property if the potential buyer is hoping to make 14% per year on his investment over a period of 12 years.
An oil and gas producing company owns 48,000 acres of land in a southeastern state. It operates 700 wells which produce 21,000 barrels of oil per year and 1.5 million cubic feet of natural gas per year. The revenue from the oil is $2,100,000 per year and for natural gas the annual revenue is $588,000 per year. What bid should be made to purchase this property if the potential buyer is hoping to make 14% per year on his investment over a period of 12 years.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
An oil and gas producing company owns 48,000 acres of land in a southeastern state. It operates 700 wells which produce 21,000 barrels of oil per year and 1.5 million cubic feet of natural gas per year. The revenue from the oil is $2,100,000 per year and for natural gas the annual revenue is $588,000 per year. What bid should be made to purchase this property if the potential buyer is hoping to make 14% per year on his investment over a period of 12 years.
Transcribed Image Text:Present
Worth Factor
Discrete Compounding; /=14%
Single Payment
Compound
Amount
Factor
Compound
Amount
Uniform Series
Sinking
Factor
Present
Worth Factor
Fund
Factor
To Find F
To Find P
To Find F
To Find P
To Find A
Capital
Recovery
Factor
To Find A
Given P
Given F
Given A
Given A
Given F
Given P
N
F/P
P/F
F/A
P/A
A/F
A/P
1
1.1400
0.8772
1.0000
0.8772
1.0000
1.1400
2
1.2996
0.7695
2.1400
1.6467
0.4673
0.6073
3
1.4815
0.6750
3.4396
2.3216
0.2907
0.4307
4
1.6890
0.5921
4.9211
2.9137
0.2032
0.3432
5
1.9254
0.5194
6.6101
3.4331
0.1513
0.2913
6
2.1950
0.4556
8.5355
3.8887
0.1172
0.2572
7
2.5023
0.3996
10.7305
4.2883
0.0932
0.2332
8
2.8526
0.3506
13.2328
4.6389
0.0756
0.2156
9
3.2519
0.3075
16.0853
4.9464
0.0622
0.2022
10
3.7072
0.2697
19.3373
5.2161
0.0517
0.1917
11
4.2262
0.2366
23.0445
5.4527
0.0434
0.1834
12
4.8179
0.2076
27.2707
5.6603
0.0367
0.1767
13
5.4924
0.1821
32.0887
5.8424
0.0312
0.1712
14
6.2613
0.1597
37.5811
6.0021
0.0266
0.1666
15
7.1379
0.1401
43.8424
6.1422
0.0228
0.1628
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