Present Value for an Oil Well
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An oil well is expected to yield an annual net return of $25,000 for the next 15 years, after which it will run dry. An investor wants a return on his investment of 20%. He can establish a sinking fund earning 10% annually. How much should he pay for the oil well?
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An oil well is expected to yield an annual net return of $25,000 for the next 15 years, after which it will run dry. An investor wants a return on his investment of 20%. He can establish a sinking fund earning 10% annually. How much should he pay for the oil well? ...
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