Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 9

Computing Value of an Asset Based on Present Value
You have the chance to purchase an oil well. Your best estimate is that the oil well's net royalty income will average $25,000 per year for five years. There will be no residual value at that time, Assume that the cash inflow occurs at each year-end and that considering the uncertainty in your estimates you expect to earn 15 percent per year On the investment. What should' you be willing to pay for this investment right now