2. A small oil company considers the continuous pumping of oil from a well as a continuous income stream, f(t) = 600€-0.2t in thousands of dollars per year. (a) Find an estimate of the total income from this well over the next 10 years.
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- A natural gas well is projected to produce $200,000 in profit during its first year of operation, $190,000 the second year, $180,000 the third year, and so on, continuing this pattern. If the well is expected to produce for a total of 10 years, and the effective annual interest rate is 8%, which of the following most closely represents the present worth of the well? a. $1,770,000. b. $1,508,000c. $1,253,000. d. $1,082,000.Your company has a well that needs some work to resume production. The work will cost $550,000. After the work is complete, the well is expected to produce the annual oil production shown in the following table. Your WI is 80% and your NRI is 68%. Operating costs are estimated to be $35,000 per year. Assume a constant oil price of $85/Bbl. Calculate total net cash flow (BFIT) for this investment. Year 1 2 3 8/8ths Production, Bbl 5000 4200 3600 Answer: 2 Would you rather own (A) WI = 80%, NRI = 64% or (B) WI = 40%, NRI = 34% ? WHY? 3 You are going to invest $30,000. Your goal is to double your investment in 10 years. At approximately what interest rate do you need to invest? 4 Your first job gives you an incentive to stay for a minimum of 3 years. At the end of 3 years, the company will give you a bonus of $15,000. Assuming an interest rate of 6% per year, what is the present value of the Bonus? Your bank has quoted you a nominal interest rate of 17%. Your loan will be compounded…Red Zone Corporation recently purchased a new machine for $339,0 13.20. The new equipment has a useful life of 10 years. Net cash flows will be $60,000 per year, end of year payments. What is the internal rate of return? Question 1Select one: a. 12 percent b. 16 percent c. 14 percent d. 10 percent e. 18 percent
- Suppose that an oil well is expected to produce 12, 00,000 barrels of oil during its first production year. However, its subsequent production (yield) is expected to decrease by 9% over the previous year's production. The oil well has a proven reserve of 10,500,000 barrels.(a) Suppose that the price of oil is expected to be $120 per barrel for the next six years. What would be the present worth of the anticipated revenue trim at an interest rate of 10% compounded annually over the next six years?(b) Suppose that the price of oil is expected to start at $120 per barrel during the first year, but to increase at the rate of 3% over the previous year's price. What would be the present worth of the anticipated revenue stream at an interest rate of 10% compounded annually over the next seven years?An investment of $50,000 in R&D results in additional revenue of $28,720 after 5 years and another revenue of $61,892 after 10 years. What is the rate of return on the investment?A business is planningto purchase a piece of equipment that will produce a continuous stream of income for 6 years with rate of flow f(t) = 12348. Assume the continuous income stream earns 6.85%, compounded continuously. A. Find the future value of f(t) after 6 years and interpret the result. First, write an expression for the definite integral you must evaluate to answer this question. and b b )da, where a = The future value of the investment after years is $ (Round your final answer to 4 significant figures. For example, an answer like $1,244, 252.02 would become $1,244,000.00.) B. Find the present value of the continuous income stream. That is, what single deposit into an account earning the same interest rate will produce the same future value as the continous income stream? To answer this question you must solve the equation (Use P to represent the principal amount invested.) In order to match the S that will be earned by the continous income stream over years, you would need a…
- You are looking at an investment which has an initial cost of $400,000 and a salvage value of zero after five years. What is the average accounting return for this investment given the following annual net incomes: year 1 $100,000, year 2 150,000, year 3 150,000, year 4 100,000 and year 5 50,000. a. 27.5%b. 52.5%c. 55.0%d. 137.5%Assume the following expected annual cash flows from operating a office property investment: Year 1 = $225,000; Year 2= $236,500; Year 3 = $248,000; Year 4 = $259,500; Year 5 = $271,000. If the net proceeds from the sale in Year 5 are $4.9 million and the property can be purchased today for 4.25 million, what is the expected return on the investment? 8.38% 10.00% O 12.15% 9.14%Suppose an industrial building can be purchased for $2,500,000 and is expected to yield cash flows of $180,000 in each of the next five years. (Note: assume payments are made at end of year.) If the building can be sold at the end of the fifth year for $2,800,000, calculate the IRR for this investment over the five-year holding period. A) 0.09%. B) 4.57%. C) 9.20%. Page 4 of 6 D) 10.37%
- NMTeX Oil owns several gas wells in Carlsbad, NM. Revenue from the wells has been increasing according to an arithmetic gradient for the past 5 years. The revenue in year 1 from well no. 24 was $390,000 and it increased by $15,000 each year thereafter. Determine (a) the revenue in year 3, and (b) the equivalent annual worth of the revenue through year 5. Assume an interest rate of 10% per year.Investment in a crane is expected to produce profit from its rental of $15,000 during the first year of service. The profit is expected to decrease by $2500 each year thereafter. At 12% interest, find the present worth of the profits.2. A firm plans to buy an asset for $100,000 and will completely depreciate the asset on a straight- line basis over two years. Operating cash flow from this asset will be $60,000 in each of the next two years. The cost of capital is 8%. a. What is the investment's NPV? b. What is the economic value-added (EVA) cash flow in years one and two? c. What is the project's EVA over its life? d. How do your answers to (a) and (c) compare?