Question

Can someone help me solve this please

Parrino, Fundamentals of Corporate Finance, 4e Hele l Grace Period: 3 days left I Register N PRINTER VERSION «BACK Problem 6.23 (Solution Video) Blossom Energy Company owns several gas statons Managerment is laoking to open a navs station in the western suburbs of Baltimore. One possibility that managers at the company are evaluating is to take over a station located at a site that has been teased from the county The lease, oripally for 99 γ@ers, curranty nas 73 year before expiration. The oas station generated a net cash fiow o $96,650 last yaar, anc the curment owners expect an annual growth rate of 6.3 percent. If Blassom Energy uses a discount rate of 13.9 percent to evaluata such businesses, what is the present value of this growing anruity? (Round factor vatires to 6 decimal places, e.g. 1.521253 and final answer to 2 decimal places, e.g. 15.21.) present value Question Attempts: 0 of 2 used AVE FOR LATER

Answer 1

Annual Cash Flows = $ 196650 (Periodic Payments) , Growth Rate = 6.3 % and Discount Rate = 13.9 %, Annuity Tenure = 73 years

Therefore, Present Value of Annuity (Annual Cash Flows) = 196650 x [1/ (0.139 - 0.063)] x [1-{(1.063)/(1.139)}^(73)] = $ 2570766.9 ~ $ 2570767