that you paid $11 million for rights to develop land with oil under the ground. It costs $5 million to develop the site and pump the oil into tankers for shipment. The crude oil in the tankers is worth $20 per barrel. The site is estimate to be able to produce 1 million barrels over its life. If the site is developed in a year rather than immediately, the value per barrel is likely to increase to $25.

that you paid $11 million for rights to develop land with oil under the ground. It costs $5 million to develop the site and pump the oil into tankers for shipment. The crude oil in the tankers is worth $20 per barrel. The site is estimate to be able to produce 1 million barrels over its life. If the site is developed in a year rather than immediately, the value per barrel is likely to increase to $25.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 22P

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