You own a gas pipeline that requires no maintenance and will produce $2 million of revenue next year. Unfortunately, the volume of gas is expected to decline by 4.0% per year.

a.If the discount rate is 11.0% and the pipeline lasts forever, what is it worth today?

b.If the pipeline is to be abandoned at the end of 20 years, what is it worth today?

2 answers

20000
30000

12500000

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