excans:1ebf3eb801: Difference between revisions
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(Created page with "Assume all the oil is sold at the end of each year; for example the PV of the production for the first year is $7000×$15/1.08 = $97, 222. The PV of the second year production is $6580×$15/1.08<sup>2</sup> = $84, 619. The PV of the total production in the first 12 years is $608,254 and by then the annual production has declined to 3,544 barrels. '''References''' {{cite web |url=https://alo.mit.edu/wp-content/uploads/2015/06/PS_Part1.pdf |last1=Lo |first1=Andrew...") |
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'''Solution: A''' | |||
Assume all the oil is sold at the end of each year; for example the PV of the production for the first year is | Assume all the oil is sold at the end of each year; for example the PV of the production for the first year is | ||
Latest revision as of 19:03, 4 December 2023
Solution: A
Assume all the oil is sold at the end of each year; for example the PV of the production for the first year is
$7000×$15/1.08 = $97, 222.
The PV of the second year production is
$6580×$15/1.082 = $84, 619.
The PV of the total production in the first 12 years is $608,254 and by then the annual production has declined to 3,544 barrels.
References
Lo, Andrew W.; Wang, Jiang. "MIT Sloan Finance Problems and Solutions Collection Finance Theory I" (PDF). alo.mit.edu. Retrieved November 30, 2023.