Question: An oil well produces 20 000 barrels of oil per year
An oil well produces 20,000 barrels of oil per year. Suppose the price of oil is $50 per barrel. You want to purchase the right to the oil produced by this well for the next five years. At a discount rate of 10%, what is the value of the oil rights? (You can assume that the cash flows from selling oil arrive at annual intervals).
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