ne Oil & Gas is considering an investment in Perfect Lease. Given the following information, calculate the payback period (in months). Should Sunshine invest in Perfect Lease if management requires a payback period of less than 36 months? Acquisition cost of Perfect Lease $60,000 Drilling cost of one well $450,000 Estimated completion cos
ne Oil & Gas is considering an investment in Perfect Lease. Given the following information, calculate the payback period (in months). Should Sunshine invest in Perfect Lease if management requires a payback period of less than 36 months? Acquisition cost of Perfect Lease $60,000 Drilling cost of one well $450,000 Estimated completion cos
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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Mf2.
Sunshine Oil & Gas is considering an investment in Perfect Lease. Given the following information, calculate the payback period (in months). Should Sunshine invest in Perfect Lease if management requires a payback period of less than 36 months?
Acquisition cost of Perfect Lease
$60,000
Drilling cost of one well
$450,000
Estimated completion cost
$600,000
Estimated selling price per bbl
$55
Estimated lifting cost per bbl
$20
State severance tax
6%
Royalty interest
10%
Estimated monthly production
750 bbls per month
Payback period (in months, rounded to two decimal places):
Based on payback, should Sunshine invest in Perfect Lease? (yes or no):
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