You are planning to acquire a productive oil well that is expected to produce 2,000 barrels of oil per year for 30 years. The current price of oil is $80 per barrel, but the price is expected to increase at an average rate of 2.50 percent per year over the 30 years. If your opportunity cost of funds is 9.25 percent p.a., what would be the upper limit of how much you would be willing to pay for this investment?

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To calculate the upper limit of how much you would be willing to pay for the investment we can use t... View the full answer