6.36 An oil well presently produces 80,000 barrels per year. It will last for 20 years more,...
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6.36 An oil well presently produces 80,000 barrels per year. It will last for 20 years more, but the production will fall by 6 percent per year. Oil prices are expected to increase by 4 percent per year. Currently the price of oil is $60 per barrel. What is the present value of the well's production if the discount rate is 12 percent?
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