Problem regarding the pv of the cash flow

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Reference no: EM13969812

1. You own an oil pipeline that generates $780,000 cash flow over the next year. The pipeline's operating costs are negligible and it is expected to last for a very long time. The interest rate is 4.45% but the volume of oil is expected to decline by 1.75% per year. What is the PV of the cash flow if it is assumed to last forever?

A) 12580045.16
B) 12580245.16
C) 12580445.16
D) 12580546.16
E) None of the above

2. You inherited 175,000 from Auntie Paris. What is the maximum amount you can withdraw each year forever if the interest rate is 5.45%?

A) 9137.5
B) 9337.5
C) 9537.5
D) 9737.5
E) None of the above

Reference no: EM13969812

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