Modern Energy Company owns several gas stations. Management is looking to open a new station in the western suburbs of Baltimore. One possibility they are evaluating is to take over a station located at a site that has been leased from the county. The lease, originally for 99 years, currently has 73 years before expiration. The gas station generated a net cash flow of $87,180 last year, and the current owners expect an annual growth rate of 6.3 percent. If Modern Energy uses a discount rate of 16.6 percent to evaluate such businesses, what is the present value of this growing annuity? (Round PV factor calculations to 6 decimal places, e.g. 1.521253 and final answer to 2 decimal places, e.g. 15.25.) Present value

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Problem 6.23
Modern Energy Company owns several gas stations. Management is looking to open a new station in the western suburbs of Baltimore. One possibility they are evaluating is to take
over a station located at a site that has been leased from the county. The lease, originally for 99 years, currently has 73 years before expiration. The gas station generated a net cash
flow of $87,180 last year, and the current owners expect an annual growth rate of 6.3 percent. If Modern Energy uses a discount rate of 16.6 percent to evaluate such businesses,
what is the present value of this growing annuity? (Round PV factor calculations to 6 decimal places, e.g. 1.521253 and final answer to 2 decimal places, e.g. 15.25.)
Present value
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Transcribed Image Text:Problem 6.23 Modern Energy Company owns several gas stations. Management is looking to open a new station in the western suburbs of Baltimore. One possibility they are evaluating is to take over a station located at a site that has been leased from the county. The lease, originally for 99 years, currently has 73 years before expiration. The gas station generated a net cash flow of $87,180 last year, and the current owners expect an annual growth rate of 6.3 percent. If Modern Energy uses a discount rate of 16.6 percent to evaluate such businesses, what is the present value of this growing annuity? (Round PV factor calculations to 6 decimal places, e.g. 1.521253 and final answer to 2 decimal places, e.g. 15.25.) Present value Click if you would like to Show Work for this question: Open Show Work
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