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QUESTION
Pipeline generates a net cash inflow of $2 million over the coming year. Its operating costs are negligible.
Pipeline generates a net cash inflow of $2 million over the coming year. Its operating costs are negligible. The volume of oil shipped is declining, and cash flows are expected to decline by 4% per year. Discount rate is 10%. What is the PV of the pipeline's cash flows if the pipeline is operated forever? What is the PV of the cash flows if the pipeline will be shut down after 20 years?
