Royalties received by an investor in an oil well vary according to the price of oil. Data collected from stripper wells in an established oil field were used to develop the probability-royalty relationship shown below. 11eb5c00_dd0f_aeca_bd4c_4f2109b4594c_SM2394_00 a) Calculate the expected value of royalty income (RI) per year. b) Determine the probability that the royalty income will be at least $12,600 per year.

Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Edition 7ISBN: 978-0073376301

Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Edition 7ISBN: 978-0073376301

Exercise 1

Royalties received by an investor in an oil well vary according to the price of oil. Data collected from stripper wells in an established oil field were used to develop the probability-royalty relationship shown below.

a) Calculate the expected value of royalty income (RI) per year.
b) Determine the probability that the royalty income will be at least $12,600 per year.

Explanation

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Discrete variables are those variables w...