SGC is preparing to make a bid for oil and gas leasing rights in a newly opened drilling area in the Gulf of Mexico.

SGC is preparing to make a bid for oil and gas leasing rights in a newly opened drilling area in the Gulf of Mexico. SGC is trying to decide whether to place a high bid of $16 million or a low bid of $7 million. SGC, expects to be bidding against its major competitor Western Gas Corporation (WGC) and predicts WGC to place a bid of $10 million with a probability of 0.4 or a bid of $6 million with probability 0.6. Geological data collected at the drilling site indicates a 0.15 probability of the reserves at the site being large, a 0.35 probability of being average, and a 0.5 probability of being unusable. A large or average reserve would most likely represent a net asset value of $120 million or $28 million, respectively, after all drilling and extraction costs are paid. The company that wins the bid will drill an exploration well at the site for a cost of $5 million. a. Develop a decision tree for this problem. b. Implement your Decision Tree in Precision Tree. Then print out your solved decision tree on a single page and attach it as a part of your submission. c. What is the optimal decision according to the EMV criterion?
 
“Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!”

"Is this qustion part of your assignmentt? We will write the assignment for you. click order now and get up to 40% Discount"