You drill and complete a Baaken well with the following production. Oil price is $60/stb and expected to remain flat for the first five years. If the well costs $ó million dollars to drill and complete, how long will it take to reach payout? The interest rate is 4%. Year BO 1 51,100 41,975 3 29,200 4 18250 5 9125 What is the profit you calculated in problem 3 (Baaken well problem)? What is the profit to investment ratio (PIR) for problem 3 (Baaken well problem)?
You drill and complete a Baaken well with the following production. Oil price is $60/stb and expected to remain flat for the first five years. If the well costs $ó million dollars to drill and complete, how long will it take to reach payout? The interest rate is 4%. Year BO 1 51,100 41,975 3 29,200 4 18250 5 9125 What is the profit you calculated in problem 3 (Baaken well problem)? What is the profit to investment ratio (PIR) for problem 3 (Baaken well problem)?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:You drill and complete a Baaken well with the following production. Oil price is $60/stb and expected to remain flat for the first five years. If the
well costs $6 million dollars to drill and complete, how long will it take to reach payout? The interest rate is 4%.
Year
BO
1
51,100
2
41,975
29,200
18250
9125
What is the profit you calculated in problem 3 (Baaken well problem)?
What is the profit to investment ratio (PIR) for problem 3 (Baaken well problem)?
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