You are investigating the possibility of investing in a productive oil well that is expected...
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You are investigating the possibility of investing in a productive oil well that is expected to produce 4,000 barrels of oil per year for 5 years. The current price of oil is $32 per barrel, but the price is expected to increase at a constant rate of 5 percent per year for the next 5 years. If your opportunity cost of funds is 11% p.a., what would be the upper limit of how much you would be willing to invest in this oil well?
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