Lubbock Oil Co. incurred $250,000 in drilling costs prior to deciding whether to complete the...
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Lubbock Oil Co. incurred $250,000 in drilling costs prior to deciding whether to complete the well. The company estimates that the completion costs are $120,000 and the discounted future net cash flows from the sale of the oil and gas from this well is expected to be $200,000.
The company will have a loss of $170,000 in total for this well if the well is completed.
The company should not complete the well.
The company will have a gain of $80,000 in total for this well if this well is completed.
The company should complete the well only if the discounted future net cash flows from the sale of the oil and gas from the well is $370,000.
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