You inherited an oil well that will pay you $30000 per year for 25 years, with t

Question

You inherited an oil well that will pay you $30000 per year for 25 years, with the first payment being made today.  If you think a fair return on the well is 7.5%, how much should you ask for it if you decide to sell it? You inherited an oil well that will pay you $30000 per year for 25 years, with the first payment being made today.  If you think a fair return on the well is 7.5%, how much should you ask for it if you decide to sell it? You inherited an oil well that will pay you $30000 per year for 25 years, with the first payment being made today.  If you think a fair return on the well is 7.5%, how much should you ask for it if you decide to sell it?

Explanation / Answer

PV = 30000+ 30000/1.075 + 30000/1.075^2 +.....30000/1.075^24

PV = $359,489

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