Risk Analysis of Shale Gas Extraction Project

Code :FCF0031

Year :
2020

Industry : Oil and Gas

Region : Asia

Teaching Note:Available

Structured Assignment :Not Available

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Abstract: The case involves an analysis of the risks involved in estimating the cash flows and ascertaining the viability of shale gas extraction project at Petro India Limited. It helps students understand the capital budgeting process, the inputs required to arrive at the estimates, and the risks involved in the possibility of any error during the estimation process. The case demonstrates various risk management techniques applied to the Shale Gas Extraction project to further refine the decision-making ability of the management team in the capital budgeting process.


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Pedagogical Objectives:

  • To understand the capital budgeting process.
  • To identify the inputs required to make the cash flow estimates.
  • To examine the risks involved in the estimation process and apply various capital budgeting risk management techniques.
  • To evaluate the various possible outcomes of estimation errors and ratify the viability of the project in the presence of potential estimation errors.


    Keywords :Shale gas extraction, NPV, Sensitivity analysis, Scenario analysis, Decision tree, Economic life of the project, Probability of success or failure, Optimistic, Pessimistic, Operating Cash Flows, Terminal Cash Flow, Salvage value

    Contents :
    » INTRODUCTION


    Case Introduction >>


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