One of the biggest man-made environmental catastrophe in American History- millions of gallons of oil flowing unchecked into the Gulf of Mexico from 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?
One of the biggest man-made environmental catastrophe in American History- millions of gallons of oil flowing unchecked into the Gulf of Mexico from 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
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