Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. permian partners (pp) produces from aging oil fiel

Permian Partners (PP) produces from aging oil fields in west Texas. Production is 1.97 million barrels...

50.1K

Verified Solution

Question

Finance

Permian Partners (PP) produces from aging oil fields in westTexas. Production is 1.97 million barrels per year in 2016, butproduction is declining at 9% per year for the foreseeable future.Costs of production, transportation, and administration add up to$26.70 per barrel. The average oil price was $66.70 per barrel in2016. PP has 8.7 million shares outstanding. The cost of capital is11%. All of PP’s net income is distributed as dividends. Forsimplicity, assume that the company will stay in business foreverand that costs per barrel are constant at $26.70. Also, ignoretaxes. a. Assume that oil prices are expected to fall to $61.70 perbarrel in 2017, $56.70 per barrel in 2018, and $51.70 per barrel in2019. After 2019, assume a long-term trend of oil-price increasesat 7% per year. What is the ending 2016 value of one PP share?Share Value= b-1. What is PP’s EPS/P ratio? b-2. Is it equal to the11% cost of capital? Yes or no

Answer & Explanation Solved by verified expert
3.9 Ratings (705 Votes)
    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Medical Sciences
1.2K views

How would the volume measurements (tidal volume, inspiratory reserve volume, expiratory reserve volume, residual volume, vital capacity)...

General Management
1.2K views

Please change it in other words because it is plagiarized Topic: Training and development impact on Employee...

Physics
1.2K views

In Young s double slit experiment using the light of wavelength X 60 fringes are...

Geometry
1.2K views

Select the correct answer from each drop-down menu.Two six-sided fair dice are rolled simultaneously.The probability...

Basic Math
1.2K views

An Early Childhood Education student is doing a report on how many children aged 2...

Statistics
1.2K views

Listed below are systolic blood pressure measurements in mm Hg obtained from the same woman...

Statistics
1.2K views

Keke s Kookies https kekekookies com sells mini cookies in packs of 5 and has...

Accounting
1.2K views

On 6/30/12, a company recorded a journal entry for the coupon payment on its bond....

Accounting
1.2K views

5. For a qualified service member, deductible expenses for moving do not include: a) The...

Accounting
1.2K views

When the net present value is positive, the present value index will be: a.negative. b.less...

Accounting
1.2K views

What is the value ending inventory using a perpetual inventory system and a fifo flow...

Accounting
1.2K views

If a company receives $12,200 from the stockholders to establish a corporation, the effect on...