Commence new service station at location in queensland

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ABM Petroleum Ltd, an oilfield service company, is planning to commence a new service station at a location in Queensland. For this, the company is evaluating the option of taking over a station located at the site. The site has been leased from the state government. The lease currently has 75 years before expiration. The service station generated a net cash flow of $95000 last year, and the current owners expect 7% annual growth. If ABM Petroleum Ltd uses a discount rate of 10 per cent to evaluate such businesses, what is the present value of this growing annuity?

Reference no: EM131966632

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