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.
