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Q2: Crisis in the Gulf How vividly do you remember the biggest man-made environmental catastrophe in American historymillions of gallons of oil owing unchecked into

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Q2: Crisis in the Gulf How vividly do you remember the biggest man-made environmental catastrophe in American historymillions of gallons of oil owing unchecked into the Gulf of Mexico 'om an undersea well? In response to this tragedy, British Petroleum (BP) will make payments into a fund to pay for some of the damages to the Gulf Coast resulting from their massive oil spill in April and following months of 2010. BP will pay $3 billion at the end of the third quarter of 2010 and another $2 billion in the fourth quarter of 2010. BP will then make payments of $1.25 billion each quarter thereafter until a total of $20 billion has been paid into the fund. If the opportunity cost of capital (interest rate) is 3% per quarter, what is the equivalent value of this payment stream at the beginning of the third quarter of 2010? 39

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