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You are investigating the possibility of investing in a productive oil well that is expected to produce 2,500 barrels of oil per year for 5
You are investigating the possibility of investing in a productive oil well that is expected to produce 2,500 barrels of oil per year for 5 years. The current price of oil is $70 per barrel, but the price is expected to increase at a constant rate of 3 percent per year for the next 5 years. If your opportunity cost of funds is 13.50 percent p.a., what would be the upper limit of how much you would be willing to invest in this oil well? Please show calculations!
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