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Pete 353 Exam 1 Questions & Answers 2024/2025

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Pete 353 Exam 1 Questions & Answers 2024/2025 Economics - ANSWERSDrives the decision making in oil and gas companies Net Cash Flow In - ANSWERSProduction x Price=Revenue Net Cash Flow Out - ANSWERS% Goes to the Royalty Owner Operating Expenses Production Taxes Capital Expenditures Fe...

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  • September 10, 2024
  • 18
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • Pete 353
  • Pete 353
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Pete 353 Exam 1 Questions & Answers
2024/2025

Economics - ANSWERSDrives the decision making in oil and gas companies



Net Cash Flow In - ANSWERSProduction x Price=Revenue



Net Cash Flow Out - ANSWERS% Goes to the Royalty Owner

Operating Expenses

Production Taxes

Capital Expenditures

Federal Taxes



I - ANSWERSInterest



P - ANSWERSPrincipal



n - ANSWERSyears



t - ANSWERSloan period or investment period, years



m - ANSWERSnumber of compounding or interest periods per year

m=1 for yearly

m=4 for quarterly

m=12 for monthly



in - ANSWERSnominal interest rate, fraction per year

,ie - ANSWERSeffective interest rate, fraction per year



r - ANSWERSinterest rate



Principal - ANSWERSamount of borrowed or loaned money



Interest - ANSWERSrent paid for the use of money loaned



Rate of Return - ANSWERSis the incremental gain on the investment to the loaner



What does the simple 'n' refer to? - ANSWERSIt is years



What is the m? - ANSWERSit is the number of times the interest is applied or compounded



Simple Interest - ANSWERSonly initial principal, over a fixed loan period, at a set rate

I=principalXperiodsXrate



Payback Sum at End of Year - ANSWERSSum= Initial Principal + Interest



Simple Interest, Payback before End of Period - ANSWERSI=Pni

Payback=Initial principal X (1+PeriodXrate)



Simple Interest - ANSWERSIs calculated using principal only, earning interest over a fixed loan period. At
the end of the period, both the principal and the accrued interest are returned.



Compound Interest - ANSWERSIs the interest accrued on BOTH the principal and the unpaid interest
earned in the previous periods. Interest accrues on both principal and unpaid interest from previous
periods.

, Compound Interest Equation - ANSWERSI=Px(1+(i/m)^nxm)



Nominal Rate (in) - ANSWERSis expressed per year and then applied to a compound period as fraction of
the year

-Compounded periodically or continuously



Effective rate (in) - ANSWERSexpresses equivalent rate for the year resulting from compounding at
nominal rate for each period during the year



ie=

Periodic - ANSWERS(1+(in/m)^m)-1

for periodic compounding



ie=

Continuous - ANSWERS(e^r)-1



Consumer Price Index (CPI) - ANSWERSIs often used to adjust data for inflation

(x/Salary in 2011)=(CPI 2015/CPI 2011)



Future Value of Present Sum - ANSWERSF=P(1+ie)^n



(1+ie)^n - ANSWERSF/P



Annuity - ANSWERSa series of equal periodic payments (disbursements) over time



Ordinary Annuity - ANSWERSPv determined one period before first payment



Annuity Due - ANSWERSPv determined as of date of first payment

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