NMTeX Oil owns several gas wells in Carlsbad, NM. Revenue from the wells has been increasing according to an arithmetic gradient for the past 5 years. The revenue in year 1 from well no. 24 was $390,000 and it increased by $15,000 each year thereafter. Determine (a) the revenue in year 3, and (b) the equivalent annual worth of the revenue through year 5. Assume an interest rate of 10% per year.
NMTeX Oil owns several gas wells in Carlsbad, NM. Revenue from the wells has been increasing according to an arithmetic gradient for the past 5 years. The revenue in year 1 from well no. 24 was $390,000 and it increased by $15,000 each year thereafter. Determine (a) the revenue in year 3, and (b) the equivalent annual worth of the revenue through year 5. Assume an interest rate of 10% per year.
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 22P
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NMTeX Oil owns several gas wells in Carlsbad, NM.
Revenue from the wells has been increasing according to an arithmetic gradient for the past 5 years. The revenue
in year 1 from well no. 24 was $390,000 and it
increased by $15,000 each year thereafter. Determine
(a) the revenue in year 3, and (b) the equivalent annual
worth of the revenue through year 5. Assume an
interest rate of 10% per year.
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