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What is the present value of this growing annuity

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Question 1: Pharoah Energy Company owns several gas stations. Management is looking to open a new station in the western suburbs of Baltimore. One possibility that managers at the company are evaluating is to take over a station located at a site that has been leased from the county. The lease, originally for 99 years, currently has 73 years before expiration. The gas station generated a net cash flow of $87,710 last year, and the current owners expect an annual growth rate of 6.3 percent. If Pharoah Energy uses a discount rate of 12.3 percent to evaluate such businesses, what is the present value of this growing annuity?

Reference no: EM132906713

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