Give typing answer with explanation and conclusion Deep Sea Drilling is evaluating drilling for oil in the Gulf of Mexico. It will cost $830 million to buy an oil rig. Drilling would start immediately. The company has a cost of capital of 11%. There is a 50% probability that the new well will be succcessful, in which case the free cash flow from the well will be $200 million per year for 20 years. Otherwise, it will only generate $40 milion per year for 10 years. What is the NPV of the project (in $ million)?
Give typing answer with explanation and conclusion Deep Sea Drilling is evaluating drilling for oil in the Gulf of Mexico. It will cost $830 million to buy an oil rig. Drilling would start immediately. The company has a cost of capital of 11%. There is a 50% probability that the new well will be succcessful, in which case the free cash flow from the well will be $200 million per year for 20 years. Otherwise, it will only generate $40 milion per year for 10 years. What is the NPV of the project (in $ million)?
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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Give typing answer with explanation and conclusion
Deep Sea Drilling is evaluating drilling for oil in the Gulf of Mexico. It will cost $830 million to buy an oil rig. Drilling would start immediately. The company has a cost of capital of 11%.
There is a 50% probability that the new well will be succcessful, in which case the
What is the NPV of the project (in $ million)?
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