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An oil company believes that a newly discovered deposit will generate revenues of $1,380,000 each year for the foreseeable future. The extraction cost, however, will
An oil company believes that a newly discovered deposit will generate revenues of $1,380,000 each year for the foreseeable future. The extraction cost, however, will be $81,420 over the next year and increase at a rate of 4% each year as they deposit is depleted. If the companys opportunity cost of capital is 10%, for how many years can you extract the oil before the cost of extraction overtakes the revenues it generates? (round to the nearest whole year)
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