Texas Wildcatters Inc. (TWI) is in the business of finding and developing oil properties, and then
selling the successful ones to major oil refining companies. TWI is now considering a new
potential field, and its geologists have developed the following data, in thousands of dollars.
t = 0. A $400 feasibility study would be conducted at t = 0. The results of this study would determine
if the company should commence drilling operations or make no further investment and abandon the
project. t = 1. If the feasibility study indicates good potential, the firm would spend $1,000 at t = 1 to
drill exploratory wells. The best estimate is that there is an 80% probability that the exploratory wells
would indicate good potential and thus that further work would be done, and a 20% probability
that the outlook would look bad and the project would be abandoned. t = 2.
I see that you are looking for information regarding the potential field considered by Texas Wildcatters Inc. (TWI). The data provided includes the costs associated with conducting a feasibility study at t = 0 and drilling exploratory wells at t = 1. However, the information regarding t = 2 is missing from the question.
To proceed with the calculations for t = 2, we would need additional data, such as the costs or investments associated with that time period. Without this information, it is not possible to provide a complete analysis of the project's financials or decision-making process.
If you have any additional information or specific questions related to the project, please provide it, and I'll be happy to assist you further.