An oil producer discovers an oil supply in Texas that can be pumped for a profit of $60 per barrel now, $65 per barrel in three years, $70 per barrel in five years, or $75 a barrel in seven years. The current market rate of interest is 5 percent. When should the oil producer extract the oil to obtain the most profit per barrel in present value terms?

A) five years
B) three years
C) seven years
D) today

To determine the most profit per barrel in present value terms, we calculate the present value (PV) of the profits for each option using the formula PV = FV / (1 + r)^n, where FV is the future value (profit per barrel), r is the interest rate (5% or 0.05), and n is the number of years. Calculating for each:- Today: $60 (no need to discount, it's already in present value terms).- In three years: $65 / (1 + 0.05)^3 ≈ $56.23.- In five years: $70 / (1 + 0.05)^5 ≈ $54.83.- In seven years: $75 / (1 + 0.05)^7 ≈ $53.45.The highest present value is $60, which is obtained by extracting the oil today.