A farmer discovers a natural gas reserve on his property. He can extract the natural gas for a profit of $40 per unit now, $55 per unit in one year, $57 per unit in two years, and $60 in three years. The current market rate of interest is 6 percent. When should the farmer extract the natural gas to obtain the most profit per unit in present value terms?

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The Answer of A farmer discovers a natural gas reserve on his property. He can extract the natural gas for a profit of $40 per unit now, $55 per unit in one year, $57 per unit in two years, and $60 in three years. The current market rate of interest is 6 percent. When should the farmer extract the natural gas to obtain the most profit per unit in present value terms?

A Farmer Discovers a Natural Gas Reserve on His Property