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What is the PV of the cash flows

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Reference no: EM132920009

Problem - THE MECHANICS OF DISCOUNTING - You own an oil pipeline that will generate a net cash flow of $4 million in the coming year. The pipeline is expected to last for a long time. Unfortunately, the volume of oil shipped is declining, and cash flows are expected to decline by 2% per year. The relevant discount rate is 9%. What is the PV of the pipeline's cash flows if the pipeline is operated forever? And what is the PV of the cash flows if the pipeline will be shut down after 30 years (with no additional cash flows)?

Reference no: EM132920009

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