Reference no: EM131224030
An oil company contemplates investing 100 million dollars per year (in constant dollars) for five years in exploratory work to confirm the existence of new exploitable reserves. It will then face a potential delay until market conditions justify exploitation, which will require investing 200 million dollars for three years in production facilities, following which delivery of oil can start with a projected net revenue of 100 million dollars per year, essentially ad infinitum.
a. At a real discount rate of 5%/yr what is the longest delay tolerable between the start of exploitation and the start of oil delivery: i.e., how far in advance is it worth proving out reserves?
b. If the real discount rate were 10%/yr, what is the maximum time delay?3. An oil company contemplates investing 100 million dollars per year (in constant dollars) for five years in exploratory work to confirm the existence of new exploitable reserves. It will then face a potential delay until market conditions justify exploitation, which will require investing 200 million dollars for three years in production facilities, following which delivery of oil can start with a projected net revenue of 100 million dollars per year, essentially ad infinitum.
a. At a real discount rate of 5%/yr what is the longest delay tolerable between the start of exploitation and the start of oil delivery: i.e., how far in advance is it worth proving out reserves?
b. If the real discount rate were 10%/yr, what is the maximum time delay?
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: At a real discount rate of 5%/yr what is the longest delay tolerable between the start of exploitation and the start of oil delivery: i.e., how far in advance is it worth proving out reserves?
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Company equity multiplier-debt ratio and roe
: Norton Company has a debt-to-equity ratio of 1.18, ROA of 12.23 percent, and total equity of $1,484,000. What are the company's equity multiplier, debt ratio, and ROE? (Roundanswers to 2 decimal places, e.g. 12.55 or 12.55%.)
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