A Consultancy Calculates That It Can Supply Crude Oil Assaying

question 58

Multiple Choice

A consultancy calculates that it can supply crude oil assaying services to a small oil producer for $115,000 per year for five years. There are some upfront costs the consultancy will require the oil producer to absorb. What is the maximum that these upfront costs could be, if the equivalent annual annuity to the oil company is to be under $160,000, given that the cost of capital is 9%?

• A) $45,000
• B) $175,034
• C) $201,289
• D) $160,000

---

Definitions:

Modus Ponens

A theoretical reasoning method where the initial statement is confirmed by the subsequent statement.

Inductive Argument

A method of logic where the arguments aim to provide substantial support for the conclusion's truth, rather than conclusive proof.

Valid Deductive Argument

A logical argument where, if the premises are true, the conclusion must also be true.

True Premises

Statements or propositions that are accepted as true and serve as the basis for an argument or reasoning.