Considering making a bid to buy pacific gulf petroleum

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The Shockers Company is considering making a bid to buy Pacific Gulf Petroleum (PGP) Company. PGP has several oil wells producing 200,000 barrels per month. It is expected that the oil production will increase 2% per month for the next 3 years. The price of oil is $50 per barrel for 3 years and is not expected to change. The operating expenses are $10 million per month and are expected to decrease by $100,000 each month. The company’s MARR is 24% per year, compounded monthly. What is the maximum price Shockers Company should bid for PGP?

Reference no: EM131245523

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