Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. your firm's geologists have discovered a small oil

Your firm's geologists have discovered a small oil field just outside of Harris County, TX....

60.1K

Verified Solution

Question

Finance

image
Your firm's geologists have discovered a small oil field just outside of Harris County, TX. The field is forecasted to produce its first cash flow exactly one year from today of $6,000,000. You estimate the beta of a similar investment is 1.5. The expected return on the market is 9%, and the risk-free rate is 3%. Your job is to determine the present value of the expected cash flows. Your answer, of course, depends on what happens to the cash flows after the first year. Calculate the present value for the following cases: 1. The cash flows are forecasted to continue forever, with no expected growth or decline. 2. The cashflows are forecasted to continue for 20 years only, with no expected growth or decline during that period. 3. The cashflows are forecasted to continue forever, increasing by 2% per year because of inflation. 4. The cash flows are forecasted to continue for 20 years only, increasing by 2% per year because of inflation

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

The effects of inhibitors of DNA synthesis can be studied in an in vitro replication system...

Biology
Q

What is the difference between system clocks and bus clocks? Which one is used for assembly...

Programming
Q

Suppose that for retirement purposes over the course of 21 years you make monthly deposits...

Basic Math
Q

The game of Dungeons and Dragons uses nonstandard dice Consider a die with eight sides...

Basic Math
Q

Use the Change of Base Formula to evaluate log4 27. Then convert log4 27 to...

Basic Math
Q

Find the rational function s asymptotes x intercepts and holes Also sketch the graph of...

Algebra
Q

A family friend has asked your help in analyzing the operations...

Accounting
Q

A sole proprietorship was started on January 1, Year 1.

Accounting
Q

Oriole Corporation sells three different models of a mosquito "zapper:" Model A12 sells for $44...

Accounting
Q

You find the monthly standard deviation of a stock is 9.40 percent. What is the...

Finance
Q

QS 7-4 (Algo) Controlling accounts and subsidiary ledgers LO C2 Following is information from Fredrickson...

Accounting
Q

question 31 question 32 31 Cybil Baunt just...

Accounting