Present value of pipelines dollar amount of cash flows

Assignment Help Financial Management

Reference no: EM131048544

Ahmad Oil Refinery, Inc. owns an crude oil pipeline. The current production of oil is at the rate of 100 million barrels a year. The current price of crude oil is about $100 a barrel and is rising at the rate of 5% per year forever. Oil reserves are not going to last forever and the flow of oil will be declining at the rate of 8% per year forever. If the rate of discount rate is 12 percent, what is the present value of the pipeline’s dollar amount of cash flows if its cash flows are assumed to last forever?

Reference no: EM131048544

Questions Cloud

Leisure time planners : In 2009, LEISURE TIME PLANNERS, LLC rented a 10,000 SF office space from Martha Associates with the following terms: 5 year lease commencing on 1/1/2009, base rent of $4.00 PSF, and an expense stop of $2 PSF. In 2010, if utilities, property and other..

Estate sector with greatest risk-volatility of cash flows : Real estate users and real estate investors have the same goals, making it easy to complete lease transactions. The real estate sector with the greatest risk / volatility of cash flows because of the duration of lease contracts is:

Price upcoming dividend growth beta : You have assigned the following values to these three firms: Price Upcoming Dividend Growth Beta US Bancorp $ 53.50 $ 3.80 8.00 % 1.81 Praxair 69.35 1.68 11.00 2.56 Eastman Kodak 22.75 1.00 10.80 0.97 Assume that the market portfolio will earn 11.20 ..

Instead of a single benchmark pe ratio : If you look at stock prices over any year, you will find a high and low stock price for the year. Instead of a single benchmark PE ratio, we now have a high and low PE ratio for each year. We can use these ratios to calculate a high and a low stock p..

Present value of pipelines dollar amount of cash flows : Ahmad Oil Refinery, Inc. owns an crude oil pipeline. The current production of oil is at the rate of 100 million barrels a year. The current price of crude oil is about $100 a barrel and is rising at the rate of 5% per year forever. Oil reserves are..

What is the target stock price in one year : Fly Away, Inc., has balance sheet equity of $5.3 million. At the same time, the income statement shows net income of $763,200. The company paid dividends of $431,208 and has 120,000 shares of stock outstanding. If the benchmark PE ratio is 17, what i..

An investor expects the dividend rate to increase : On a certain date, Kastbro has a stock price of $37.50, pays a dividend of $0.64, and has an equity cost of capital of 8%. An investor expects the dividend rate to increase by 6% per year in perpetuity. He then sells all stocks that he owns in Kastbr..

The dividends are expected to grow : A7X Corp. just paid a dividend of $2.50 per share. The dividends are expected to grow at 17 percent for the next eight years and then level off to a growth rate of 7 percent indefinitely. If the required return is 13 percent, what is the price of the..

What is the total itemized deduction : For the Tax Year 2015, George has the following expenses that he wants to include as itemized deductions for the year. His adjusted gross income is $72,000. Using information provided Form 1040 Schedule A, what is the total itemized deduction he can ..

User Account

All Pages