An oil-drilling company knows that it costs $65,000 to sink a test well. If oil is hit, the income for the drilling company will
1 answer:
Answer: The expectation for the drilling company is $20700.76.
No, the company should not sink the test well as the cost for sinking is $65000 and our expectation is just $20700.76.
Step-by-step explanation:
Since we have given that
Probability of hitting oil =
Probability of hitting oil =
Income for the drilling company = $550,000
Income for the natural gas = $428,373
According to question, we get that
Expected for the drilling company would be :
No, the company should not sink the test well as the cost for sinking is $65000 and our expectation is just $20700.76.
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<em>Alternate Interpretation</em>
If the numbers here are actual orders in and out in each of the listed months, it appears the warehouse is getting better at shipping orders. That is, they are increasing the shipment rate by 2 orders a month each month. They will eventually ship enough to cover the total number of orders in (total of 20 by April), but total shipments through April only amount to 16 orders.
