Permian Partners (PP) produces from aging oil fields in west Texas. Production is 1.85 million barrels per year in 2018, but production is declining at 7% per year for the foreseeable future. Costs of production, transportation, and administration add up to $25.50 per barrel. The average oil price was $65.50 per barrel in 2018. PP has 7.5 million shares outstanding. The cost of capital is 9%. All of PPs net income is distributed as dividends. For simplicity, assume that the company will stay in business forever and that costs per barrel are constant at $25.50. Also, ignore taxes.

a. Assume that oil prices are expected to fall to $60.50 per barrel in 2019, $55.50 per barrel in 2020, and $50.50 per barrel in 2021. After 2021, assume a long-term trend of oil-price increases at 5% per year. What is the ending 2018 value of one PP share?

Share value 2016 =

b-1 What is PP's EPS/P ratio?

EPS/P ration =

Please provide calculation for better understaning. Thanks.