(Solution) - Sassafras Oil is staking all its remaining capital on wildcat -(2025 Original AI-Free Solution)

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Sassafras Oil is staking all its remaining capital on wildcat exploration off the Cote d'Huile. There is a 10% chance of discovering a field with reserves of 50 million barrels. If it finds oil, it will immediately sell the reserves to Big Oil at a price depending on the state of the economy. Thus the possible payoffs are as follows:

Is Sassafras Oil a risky investment for a diversified investor in the stock market-compared, say, to the stock of Leaning Tower of Pita, described in Problem 15? Explain.