A working interest in an oil well is for sale. The well is expected to generate the following cash flows at the end of eac month shown. What would you be willing to pay for the working interest if money has a time value of 0.4% per month? End of Net Cash Month Flow, SM -1200 1900 1200 600 -200 34770 13 21 32

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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7
A working interest in an oil well is for sale. The well is expected to generate the following cash flows at the end of each
month shown. What would you be willing to pay for the working interest if money has a time value of 0.4% per
month?
End of
Month
0
13
21
32
Net Cash
Flow, SM
-1200
1900
1200
600
-200
You have purchased a house and take out a $600,000 loan with a 30 year term at 5% nominal annual interest rate
with monthly compounding. What are your monthly payments to the nearest penny?
Transcribed Image Text:7 A working interest in an oil well is for sale. The well is expected to generate the following cash flows at the end of each month shown. What would you be willing to pay for the working interest if money has a time value of 0.4% per month? End of Month 0 13 21 32 Net Cash Flow, SM -1200 1900 1200 600 -200 You have purchased a house and take out a $600,000 loan with a 30 year term at 5% nominal annual interest rate with monthly compounding. What are your monthly payments to the nearest penny?
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