2.55 HGT Oil expects receipts from a fracked well todecline according to an arithmetic gradient of$50,000 per year. If this year's receipts are ex-pected to be $280,000 (i.e., end of year 1) and thecompany expects the useful life of the well to be5 years, (a) what is the amount of the cash flow inyear 3, and (b) what is the equivalent uniform an-nual worth in years 1 through 5 of the income fromthe well at an interest rate of 12% per year?56. For the cash flow rewve nues shown halSi

The Equivalent Uniform Annual Worth (EUAW) is a measure used to evaluate the net value of all the…

Answered: 5 years, (a) what is the amount of the…

5 years, (a) what is the amount of the cash flow in year 3, and (b) what is the equivalent uniform an- nual worth in years 1 through 5 of the income from the well at an interest rate of 12% per year?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

2.55 HGT Oil expects receipts from a fracked well to
decline according to an arithmetic gradient of
$50,000 per year. If this year's receipts are ex-
pected to be $280,000 (i.e., end of year 1) and the
company expects the useful life of the well to be
5 years, (a) what is the amount of the cash flow in
year 3, and (b) what is the equivalent uniform an-
nual worth in years 1 through 5 of the income from
the well at an interest rate of 12% per year?
56. For the cash flow rewve nues shown hal
Si

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