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# \$20.00Investment

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You are offered the chance to invest at three different levels. You could make a small investment of just \$5,000, a more substantial investment of \$50,000, or a fairly large investment of \$150,000. All of the investments are for 5 year terms. In reviewing the start-up and overhead costs, you realize that if the price of crude oil again goes over \$110/barrel for a substantial period of time then wind power becomes viable from a pricing standpoint and your investment would be worth three times your original venture (ie. \$50,000 becomes \$150,000). If the price of crude oil rises but not quite to those levels (between \$80/barrel and \$110/barrel), then your investment becomes worth 40% more than the original investment (an annualized return of 6.96%, \$50,000 becomes \$70,000). However, if the price of crude oil remains lower (below \$80/barrel) then the profits get consumed by overhead and start-up costs and you end up only receiving back 90% of your original investment (ie. You receive \$45,000 from a \$50,000 initial investment, thereby losing \$5,000). You read an article from a prominent oil market analyst who believes the price of crude oil going back over \$110/barrel for a substantial period of time in the next 5 years is about 15%. Based upon recent OPEC statements he believes the price of crude oil increasing to between \$80/barrel and \$110/barrel is about 50% with the likelihood that the price will stay low at 35%.

Describe what method you used and why and how that led to your final investment decision.

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\$20.00
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• Posted on Apr 08, 2009 at 2:56:50PM
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