Problem
An oil company expects receipts from a group of stripper wells (wells that produce less than 10 barrels per day) to decline according to an arithmetic gradient of $50,000 per year. The receipts are expected to be $300,000 for the end of year 1, and the company expects the useful life of the wells to be 5 years.
a) List the given parameters.
b) Draw the cash flow diagram.
c) What is the amount of cash flow in year 3?
d) What is the equivalent uniform annual worth in year 1 through 5 of the income from the wells at an interest rate of 12% per year?