Register
You inherited an oil well that will pay you $25,000 per year for 25 years, with the payments being made at the beginning of each year. If you think a fair return on the well is 7.5%, how much should you
232k views
0 votes
You inherited an oil well that will pay you $25,000 per year for 25 years, with the payments being made at the beginning of each year. If you think a fair return on the well is 7.5%, how much should you ask for it if you decide to sell it?

User Merian
by
5.5k points

1 Answer

1 vote

Answer:

The answer is $299,574.17

Step-by-step explanation:

Present value of annuity due = P + P [(1-(1+i)^-n-1)/i]

PV = 25000 + 25000[1- (1.075)^-24) / 0.075]= $299,574.17

User Rahul Paru
by
5.6k points
Ask a Question
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

5.9m questions

7.8m answers

Other Questions

What are some ways you can save on car insurance?
_____ reminds customers and clients that they made a good choice in selecting a company with which to do business, or it reminds them of the good qualities of their purchase.​
Demonstrate how binomial nomenclature is related to classification systems by identifying the genus name and the specific name of the domestic cat felis catus
The dark printed words on the page of a book are easily read because they are printed on a light ground. this is an example of the principle of ____________.
On august 1 the darius co. purchased a photocopy machine for $8,000. the estimated annual depreciation on the machine is $1,680. if the company prepares annual financial statements on december 31, the
Link Copied!