Company B owns a lease granting it the right to explore for oil on a certain pie

Question

Company B owns a lease granting it the right to explore for oil on a certain piece of property, They may sell the lease for $$0,000 and let another company take the risk or they may drill hoping to find oil or gas. The three possible drilling outcomes are li Tossible outcome Probability Payoft Dry well 0.2 0.3 0.5 $100,000 Gas well Oil well Should the company drill or sell the lease? a. Drill h Sell c. Donothing d. None of the above s If the best operating level of a piece of equipment 10. Tommy is selling lemonade for $.25 and expects to is at a rate of 400 units per hour and the actual output during an hour is 350 units, which of the following is the capacity utilization rate? a. 0.75 b. 0.875 c 133 d. 2.33 e. 300 have labor costs of $.08 per cup and material expense of S.07 per cup. Along comes Mom and charges him rent for the street corner of $20. Approximately how many cups of Lemonade does he need to sell to break even? a. 182 b. 80 c. 250 d. 200 e. None of the above Which of the following is not considered a major process flow structure? a. Project b. Workcenter c Assembly line d. Fabrication e Continuous Flow 9. Which of the following is a basic type of process structure? a. Process flow diagram b. Product matrix c. Process matrix d. Workcenter e. Manual assembly 11.

Explanation / Answer

7)

expected payoff

= 0.2 * -100000 + 0.3 * 50000 + 0.5 * 100000

= 45000

since expected payoff is less than the lease amount

hence company should sell

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