Question

Suppose Clifford recently discovers oil in his fields, which greatly excites him because he can earn a profit of $49.00 per barrel based on present market conditions. Because production costs will be lower in five years, Clifford deduces he can pump the oil out at a profit of $67.00 per barrel if he chooses to wait. If the interest rate currently is 2.00%, what is the present value of the future sum of money? Based on this calculation, should Clifford pump the oil now or wait?

Answer 1