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Please help with the following question: You own a gas pipeline that requires no maintenance or other operating expenses and will produce $2 million of
Please help with the following question:
You own a gas pipeline that requires no maintenance or other operating expenses and will produce $2 million of revenue next year. Unfortunately, the volume of gas transmitted through the pipeline is expected decline by 4% per year. The discount rate is 11%.
a) if the pipeline lasts forever, what is it worth today?
b) if the pipeline were to be abandoned after 20 years, what would it be worth today?
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