Exhibit 14 -Refer to Exhibit 14

Exhibit 14.1
Drilling Experts, Inc. (DEI) finds and develops oil properties and then sells the successful ones to major oil refining companies. DEI is now considering a new potential field, and its geologists have developed the following data, in thousands of dollars.




$\begin{array}{llcc} \text { } & \text { A \$ 400 feasibility study would be conducted at t=0 . The results of this study would } \\ \text { t=0 } & \text {determine if the company should commence drilling operations or make no further } \\ \text { } & \text { investment and abandon the project.} \\\end{array}$



$\begin{array}{llcc} \text { } &\text { If the feasibility study indicates good potential, the firm would spend \$ 1,000 at t=1 } \\ \text { } &\text { to drill exploratory wells. The best estimate is that there is an 80 \% probability that the } \\\underline{ \text { t=1 }} &\text { exploratory wells would indicate good potential and thus that further work would be } \\ \text { } &\text { done, and a 20 \% probability that the outlook would look bad and the project would be } \\ \text { } &\text { abandoned. } \\\end{array}$


$\begin{array}{llcc} \text { } &\text {If the exploratory wells test positive, DEI would go ahead and spend \$ 10,000 to } \\ \text { } &\text { obtain an accurate estimate of the amount of oil in the field at t=2 . The best estimate } \\\underline{ \text { t=2 }}&\text { now is that there is a 60 \% probability that the results would be very good and a 40 \% } \\ \text { } &\text { probability that results would be poor and the field would be abandoned.} \\\end{array}$

$\begin{array}{llcc} \text { } &\text { If the full drilling program is carried out, there is a 50 \% probability of finding a lot of } \\\underline{ \text { t=3 }} &\text { oil and receiving a \$ 25,000 cash inflow at t=3 , and a 50 \% probability of finding less } \\ \text { } &\text { oil and then only receiving a \$ 10,000 inflow. } \\\end{array}$


-Refer to Exhibit 14.1.Calculate the project's coefficient of variation.(Hint: Use the expected NPV.)

A) 5.87
B) 6.52
C) 7.25
D) 7.97
E) 8.77