Claggett’s Second Famous Oil Pump Problem

Question: Claggett’s Second Famous Oil Pump Problem &…

Claggett’s Second Famous Oil Pump Problem        __________________

You own a producing oil well. If you do nothing, 1000 barrels of oil will “ooze” out of the ground in two years. Experts predict the oil can be sold for $100.80/barrel, two years from now. However, if the same 1000 barrels can be extracted in one year, by purchasing an oil pump today for $5000.00, experts predict it can be sold for $90.00/barrel. Assume, after either scenario, nothing will be left and the pump will have no salvage value.

 

Should you buy the pump? Why or Why Not?  Solve the Quadratic Formula