An oil company has paid the Irish Govt. €15m for oil exploration rights. If oil is found, the oil company must pay €24 for every barrel produ be sold for €30 per barrel and will cost €3 a barrel to extract. The Irish Govt. has imposed an additional fee of €2 a barrel to pay for insurance What is the total relevant profit?

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
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An oil company has paid the Irish Govt. €15m for oil exploration rights. If oil is found, the oil company must pay €24 for every barrel produced. The oil company has spent €9m on drilling and has just struck oil. They estimate that they will recover 10m barrels of oil. Oil can
be sold for €30 per barrel and will cost €3 a barrel to extract. The Irish Govt. has imposed an additional fee of €2 a barrel to pay for insurance against oil spills.
What is the total relevant profit?
O A. £10 millions
O B. £30 millions
O C. £3 millions
O D. £0
Transcribed Image Text:An oil company has paid the Irish Govt. €15m for oil exploration rights. If oil is found, the oil company must pay €24 for every barrel produced. The oil company has spent €9m on drilling and has just struck oil. They estimate that they will recover 10m barrels of oil. Oil can be sold for €30 per barrel and will cost €3 a barrel to extract. The Irish Govt. has imposed an additional fee of €2 a barrel to pay for insurance against oil spills. What is the total relevant profit? O A. £10 millions O B. £30 millions O C. £3 millions O D. £0
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