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F. Naz
F. Naz, B.Com
Category: Single Problem
Satisfied Customers: 5253
Experience:  Have completed B.Com and CA Finalist
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The Pampa Oil Company operates oil and gas exploration

Customer Question

The Pampa Oil Company operates oil and gas exploration throughout the panhandle of Texas. The firm recently was approached by a wildcatter named William “Wild Bill” Donovan with the prospect to develop what he thought was a sure thing. Wild Bill owned the lease and wanted to sell it to Pampa to meet some other pressing gambling debts. The exploration would involve efforts expended over the period of one year and cost $600,000 (which for simplicity we assume is paid at the end of the year). Wild Bill is extremely confident that there are 20,000 barrels of oil to be found, and he has engineering and geological reports to support his view. The value of the proposition hinges on the price of oil, the cost of exploration, and the cost of extracting the oil. Pampa Oil is very familiar with exploration and production in the area and is confident about its cost estimates. Pampa Oil estimates that the exploration would involve efforts expended over the period of six months and cost $600,000 (which for simplicity we assume is paid at the end of the year). Pampa oil also feels confident that the cost of extracting oil will be no more than $8 a barrel. However, oil prices have been very volatile, and the experts in the economy predict that oil prices might hit $50 a barrel by year-end or drop back to $35 depending upon progress made in securing a lasting peace in the Middle East. Pampa Oil is, therefore, considering the possibility of deferring development of the oil field for six months. Waiting for six months will place Pampa Oil in a better position to determine whether to go ahead with exploration or not. The risk-free rate of interest is currently 5%, and the forward price of oil one year in the future is now trading at $40 a barrel, what should the investment proposal be worth to Pampa (you may assume a zero income tax rate)
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Submitted: 1 year ago.
Category: Single Problem
Expert:  F. Naz replied 1 year ago.
Please provide complete data or you may upload at www.mediafire.com or www.wikisend.com and provide me the link and also mention your deadline, thanks
Customer: replied 1 year ago.

Ignore the link down on that question. The question is complete. I need it by 10pm tomorrow Monday Aug 3, 2015 U.S.A. Eastern Time. Thanks

Expert:  F. Naz replied 1 year ago.

http://wikisend.com/download/322222/Pampa.xlsx

Your answer is at abovelink, thanks.

Customer: replied 1 year ago.

Can you please answer this question thoroughly? It is hanging. No explanation. It is a vague answer. Can you please answer the question like in detail. Like you are responding to a graduate exam question. $80.00 is to much for me to receive such a naked answer.

Expert:  F. Naz replied 1 year ago.

The answer was given according to your requirement I am making it more explained answer and will provide it soon, thanks.

Customer: replied 1 year ago.

I see you re a chartered accountant. It must be answered to the level of CPA, ACCA or MBA level.

Expert:  F. Naz replied 1 year ago.

http://wikisend.com/download/111088/Pampa revised.xls

Customer: replied 1 year ago.

Lemme review and get back to you.

Expert:  F. Naz replied 1 year ago.

Okay will be waiting for your rating, thanks

Expert:  F. Naz replied 1 year ago.
Hi,
I'm just following up with you to see how everything is going. Did my answer help?
Let me know,
F.Naz

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