8. Solution – Expected Value Risk Analysis for Uncertain Variables Week 7 Outcome Probability NPV in $m Probability × NPV in $m Dry hole 0.65 -100 -65 Strike Oil 0.35 900 315 Total Probability = 1 Expected Value = 250
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11. Binomial Formula where X = number of successes n = number of trials p = probability of success q = probability of failure Risk Analysis for Uncertain Variables Week 7
15. Solution – Expected Value Risk Analysis for Uncertain Variables Week 7 Number of Successful Wells Probability using Binomial Distribution NPV in $m Probability × NPV in $m 0 0.064 -300 -19.2 1 0.288 700 201.6 2 0.432 1700 734.4 3 0.216 2700 583.2 Total Probability = 1 Expected Value = 1500
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