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    Present value

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    You own an oil well that will pay you $25,000 per year for 8 years, with the first payment being made today. If you think a fair return on the well is 7% how much should you ask for if you decide to sell it.

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    Solution Preview

    Here we have to find the present value since the amount to ask for will be the PV of the cash flows from the oil well. The cash flow stream is an annuity and it is annuity ...

    Solution Summary

    The solution explains how to calculate the present value