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You own an oil pipeline that will generate a 2.2 M€ cash return over the coming...

  1. You own an oil pipeline that will generate a 2.2 M€ cash return over the coming years. The pipeline’s operating costs are negligible, and it is expected to last forever. The discount rate is 8%. What is the PV of the pipeline’s cash flows?

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Answer #1

Ans 27.5 M€

The PV of the pipeline’s cash flows = Annual cash flow / Discount rate

                                                    = 2.2 / 8%

                                                     = 27.5 M€

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