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An oil well is being depleted in such a way that the free cash flow it generates each year is 5 % lower than the

An oil well is being depleted in such a way that the free cash flow it generates each year is 5% lower than the previous year. The oil produced is expected to generate $200,000 this year (assume this flow occurs at year end) and continue to generate cash flows for 19 more years (20 years of flows in total). How much is the rights to the oil in this well worth today? Assume the appropriate annual discount rate is 15%, as well as annual compounding.

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