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An oil company was evaluating the economic performance of one of its recompleted wells to...

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Accounting

An oil company was evaluating the economic performance of one of its recompleted wells to decide whether to abandon it. The company uses 10% MARR or hurdle rate. The well is expected to produce for another 5 years. Year 1 post recompletion revenue was $500,000. Annual revenues are anticipated to drop by $50,000 each year starting in year 2.

a) What is the forecast revenue for year 4?

b) What is the equivalent annual worth of the revenue for the five year period?

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