Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. you own an oil pipeline that will generate a $3.6

You own an oil pipeline that will generate a $3.6 million cash return over the...

60.1K

Verified Solution

Question

Finance

You own an oil pipeline that will generate a $3.6 million cash return over the coming year. The pipelines operating costs are negligible, and it is expected to last for a very long time. Unfortunately, the volume of oil shipped is declining, and cash flows are expected to decline by 4.5% per year. The discount rate is 12%.

1.What is the PV of the pipelines cash flows if its cash flows are assumed to last forever?

Note: Enter your answer in dollars, not millions of dollars. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount

2.What is the PV of the cash flows if the pipeline is scrapped after 16 years?

Note: Enter your answer in dollars, not millions of dollars. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.

Answer & Explanation Solved by verified expert
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